TRADE POLICY REVIEW - World Trade Organization · formalization of informal enterprises, and a new pension system. Monetary policy accommodated fiscal indiscipline at times but with

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WT/TPR/S/332

15 February 2016

(16-0923) Page: 1/96

Trade Policy Review Body

TRADE POLICY REVIEW

REPORT BY THE SECRETARIAT

MALDIVES

This report, prepared for the third Trade Policy Review of Maldives, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Maldives on its trade policies and practices. Any technical questions arising from this report may be addressed to Sergios Stamnas (tel: 022 739 5382) and Nelnan Koumtingué (tel: 022 739 6252). Document WT/TPR/G/332 contains the policy statement submitted by Maldives.

Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Maldives. This report was drafted in English.

WT/TPR/S/332 • Maldives

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CONTENTS

SUMMARY ........................................................................................................................ 6

1 ECONOMIC ENVIRONMENT ........................................................................................ 10

1.1 Overview ................................................................................................................. 10

1.2 Recent Economic Developments.................................................................................. 10

1.2.1 Growth, income, and employment ............................................................................ 10

1.2.2 Prices ................................................................................................................... 13

1.3 Main Macroeconomic Policy Developments .................................................................... 13

1.3.1 Monetary and exchange rate policy .......................................................................... 13

1.3.2 Fiscal policy .......................................................................................................... 14

1.4 Main Structural Policy Developments and Challenges ..................................................... 14

1.4.1 Tax and fiscal reform .............................................................................................. 14

1.4.2 Subsidies reform ................................................................................................... 14

1.4.3 State-owned enterprises (SOEs) .............................................................................. 15

1.4.4 Labour market reform ............................................................................................ 15

1.4.5 Pension reform ...................................................................................................... 15

1.5 Balance-of-Payments Developments ............................................................................ 15

1.6 Developments in Merchandise Trade ............................................................................ 16

1.7 Trends and Patterns in Foreign Direct Investment ......................................................... 18

2 TRADE AND INVESTMENT REGIME ............................................................................ 20

2.1 Introduction ............................................................................................................. 20

2.2 General Constitutional and Legal Framework ................................................................ 20

2.3 Trade Policy Formulation, Implementation, and Evaluation ............................................. 21

2.4 Trade Policy Objectives ............................................................................................. 22

2.5 Main Trade Laws and Transparency ............................................................................. 22

2.5.1 Legislation ............................................................................................................ 22

2.5.2 Transparency ........................................................................................................ 23

2.6 Trade Agreements and Arrangements .......................................................................... 24

2.6.1 Multilateral agreements .......................................................................................... 24

2.6.2 Regional agreements .............................................................................................. 25

2.6.3 Bilateral agreements .............................................................................................. 25

2.6.4 Generalized System of Preferences (GSP) and other unilateral preferences ..................... 26

2.7 Foreign Investment Regime ....................................................................................... 26

3 TRADE POLICIES AND PRACTICES BY MEASURE ........................................................ 29

3.1 Introduction ............................................................................................................. 29

3.2 Measures Directly Affecting Imports ............................................................................ 30

3.2.1 Registration, documentation, and customs clearance .................................................. 30

3.2.2 Customs valuation ................................................................................................. 31

3.2.3 Rules of origin ....................................................................................................... 32

3.2.4 Tariffs .................................................................................................................. 32


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3.2.4.1 Applied MFN tariff ............................................................................................... 33

3.2.4.2 MFN tariff dispersion and escalation ....................................................................... 33

3.2.4.3 Tariff bindings .................................................................................................... 35

3.2.4.4 Tariff exemptions and concessions ......................................................................... 36

3.2.4.5 Tariff preferences ................................................................................................ 37

3.2.5 Import prohibitions, restrictions, and licensing ........................................................... 37

3.2.6 Anti-dumping, countervailing, and safeguard measures ............................................... 38

3.2.7 State trading ......................................................................................................... 38

3.3 Measures Directly Affecting Exports ............................................................................. 39

3.3.1 Registration and documentation ............................................................................... 39

3.3.2 Export taxes, charges, and levies ............................................................................. 39

3.3.3 Export prohibitions, controls, and licensing ................................................................ 39

3.3.4 Export assistance ................................................................................................... 39

3.3.5 Export-processing zones ......................................................................................... 39

3.3.6 State trading ......................................................................................................... 40

3.4 Measures Affecting Production and Trade ..................................................................... 40

3.4.1 Standards and other technical requirements .............................................................. 40

3.4.1.1 Standards, testing, and certification ....................................................................... 40

3.4.1.2 Sanitary and phytosanitary (SPS) requirements ....................................................... 41

3.4.1.3 Marking, labelling, and packaging .......................................................................... 41

3.4.2 Taxation and tax incentives ..................................................................................... 42

3.4.2.1 Indirect taxes ..................................................................................................... 42

3.4.2.1.1 Goods and services tax ..................................................................................... 42

3.4.2.1.2 Bed/Green tax ................................................................................................. 43

3.4.2.1.3 Other taxes ..................................................................................................... 43

3.4.2.2 Direct taxes ....................................................................................................... 43

3.4.2.3 Tax incentives .................................................................................................... 44

3.4.3 Financial assistance ................................................................................................ 45

3.4.4 Other forms of assistance ....................................................................................... 45

3.4.5 Government procurement ....................................................................................... 45

3.4.6 Local-content requirements ..................................................................................... 47

3.4.7 State involvement in the economy ........................................................................... 47

3.4.8 Competition policy and price controls ........................................................................ 48

3.4.9 Intellectual property rights ...................................................................................... 48

3.4.9.1 Industrial property .............................................................................................. 48

3.4.9.2 Copyright and related rights ................................................................................. 48

3.4.9.3 Enforcement ....................................................................................................... 49

4 TRADE POLICIES BY SECTOR ..................................................................................... 50

4.1 Introduction ............................................................................................................. 50

4.2 Fisheries and Agriculture ........................................................................................... 51


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4.2.1 Fisheries ............................................................................................................... 51

4.2.1.1 Features ............................................................................................................ 51

4.2.1.2 Policy, legislative and institutional framework .......................................................... 52

4.2.1.3 Domestic measures ............................................................................................. 52

4.2.1.3.1 Fishing ............................................................................................................ 52

4.2.1.3.2 Fish processing and MIFCO ................................................................................ 53

4.2.1.4 Border measures................................................................................................. 54

4.2.2 Agriculture ............................................................................................................ 55

4.2.2.1 Features ............................................................................................................ 55

4.2.2.2 Policy ................................................................................................................ 55

4.2.2.3 Domestic measures ............................................................................................. 55

4.2.2.4 Border measures................................................................................................. 55

4.3 Manufacturing .......................................................................................................... 56

4.3.1 Features ............................................................................................................... 56

4.3.2 Domestic measures ................................................................................................ 56

4.3.3 Border measures ................................................................................................... 56

4.4 Energy .................................................................................................................... 57

4.4.1 Electricity ............................................................................................................. 58

4.4.2 Hydrocarbons ........................................................................................................ 60

4.5 Services .................................................................................................................. 61

4.5.1 Features ............................................................................................................... 61

4.5.2 Tourism ................................................................................................................ 61

4.5.3 Financial sector ..................................................................................................... 64

4.5.3.1 Banking ............................................................................................................. 64

4.5.3.1.1 Structure and performance ................................................................................ 64

4.5.3.1.2 Legislative and institutional framework ................................................................ 64

4.5.3.2 Insurance .......................................................................................................... 66

4.5.4 Telecommunications ............................................................................................... 67

4.5.5 Transport ............................................................................................................. 69

4.5.5.1 Maritime transport .............................................................................................. 70

4.5.5.2 Air transport ....................................................................................................... 71

REFERENCES .................................................................................................................. 74

5 APPENDIX TABLES .................................................................................................... 77

CHARTS Chart 1.1 Product composition of merchandise trade, 2009 and 2014 ...................................... 17

Chart 1.2 Direction of merchandise trade, 2009 and 2014 ...................................................... 18

Chart 3.1 Distribution of MFN applied tariff rates, 2008 and 2015 ........................................... 34

Chart 3.2 Tariff escalation by 2-digit ISIC industry, 2015 ....................................................... 34

Chart 3.3 Average applied MFN and bound tariff rates, by HS section, 2008 and 2015 ............... 35


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Chart 4.1 Interest rate spread (%), January 2009 to May 2015 .............................................. 66

TABLES Table 1.1 Selected macroeconomic indicators, 2009-14 ......................................................... 11

Table 1.2 Basic economic indicators, 2009-14 ...................................................................... 12

Table 1.3 Balance of payments, 2011-15 ............................................................................. 16

Table 1.4 Stock of (non-tourism) foreign direct investment, July 2015 ..................................... 19

Table 2.1 Main trade-related legislation, 2015 ...................................................................... 23

Table 3.1 Tariff structure, 2008, 2013 and 2015 ................................................................... 32

Table 3.2 Duty exemptions, 2009-14 .................................................................................. 36

Table 3.3 Goods subject to import permits, July 2015 ........................................................... 37

Table 3.4 Structure of tax revenue, 2009-14 ........................................................................ 42

Table 3.5 Tax exemption incentives to investors, investments and businesses in SEZs ............... 44

Table 3.6 Government procurement, 2009-14 ...................................................................... 45

Table 4.1 Fishing indicators, 2009-15 ................................................................................. 52

Table 4.2 Tourism indicators, 2009-15 ................................................................................ 62

APPENDIX TABLES Table A1. 1 Merchandise domestic exports by product groups, 2009-14 ................................... 77

Table A1. 2 Merchandise imports by product groups, 2009-14 ................................................ 78

Table A1. 3 Merchandise domestic exports by destination, 2009-14 ......................................... 79

Table A1. 4 Merchandise imports by origin, 2009-14 ............................................................. 80

Table A3. 1 Maldives' MFN applied tariff summary, 2015 ........................................................ 81

Table A3. 2 Maldives MFN and SAFTA tariff summaries, 2015 ................................................. 83

Table A3. 3 List of tariff lines where applied MFN rates exceed bindings, 2015 .......................... 85

Table A3. 4 Public enterprises of the Republic of Maldives ...................................................... 92

Table A4.1 Maldives' air transport agreements, as of end-October 2015 ................................... 95


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SUMMARY

1. Since its previous Trade Policy Review in 2009, Maldives' economic growth has been sustained, although at an irregular and relatively slower pace. Its ability to attract tourism from new and emerging markets (e.g. China) has helped the recovery from the global economic crisis. After a peak of 8.7% in 2011, real GDP growth decelerated to 2.5% in 2012 largely due to the impact of weak economic conditions in Europe on the tourism sector, but increased demand in tourism and related sectors made it rebound progressively to 6.5% in 2014. Inflation dropped progressively to 2.4% in 2014 (from a peak of 11.3% in 2011) and remained subdued in 2015; the unemployment rate also declined slightly from 12.2% in 2009 to 11.6% in 2014 owing mainly to the recovery in the tourism sector.

2. During the review period, the trade and trade-related structural reforms included the introduction of the goods and services tax (GST) and the business profit tax (BPT), new investment incentives for activities in special economic zones (SEZs), legislative measures for the formalization of informal enterprises, and a new pension system. Monetary policy accommodated fiscal indiscipline at times but with the enactment of the Fiscal Responsibility Act in 2013, strict limits on monetary accommodation were imposed, and the financing of the fiscal deficit was halted; furthermore, the 2015 Budget contained a mix of revenue raising and expenditure restraint measures as well as a large increase in capital expenditures financed by bilateral official loans.

3. Following a sharp decline in foreign exchange earnings, on 11 April 2011 Maldives, a highly-dollarized economy, switched from a de facto fixed exchange rate to a stabilized exchange rate regime with the rufiyaa allowed to fluctuate within a band of 20%. The nominal exchange rate moved quickly towards the upper limit of the band where it remains, while the real exchange rate appreciated by around 20% owing to rapid inflation pass-through. With low level of reserves, the Maldives Monetary Authority (MMA) is able to supply only a small fraction of foreign exchange demand with the rest satisfied in the parallel market; consequently, non-discriminatory exchange restrictions and a multiple currency practice (MCP) remain in place. Between 2009 and 2011 the current account deficit grew, due, inter alia, to a substantial increase in the value of imports reflecting, among other things, higher global oil prices, whereas between 2012 and 2014 it narrowed progressively owing mainly to the recovery in the tourism sector, and subdued global food and fuel inflation. In 2015 the deficit peaked due to a reduction in the trade surplus reflecting stronger domestic import demand and a fall in fish exports and re-exports. Maldives' gross official reserves rose in 2014 due to an increased supply of dollars in the market. Total public debt increased to 74.6% of GDP in 2014 while gross external debt decreased.

4. The high degree of openness of the Maldivian economy to international trade, and its integration into the world economy continued to be reflected by the ratio of its trade (exports plus imports) in goods and services-to-GDP, which rose to 198.6% in 2014 largely due to increased tourism receipts and goods imports. International trade and foreign direct investment (FDI) developments reflect the continuous importance of Asia as Maldives' main regional market and supplier, while the European Union remains its major individual merchandise market followed by Thailand. Marine food (mainly fish, crustaceans, and preparations thereof) remain Maldives' main exports. The foreign investment regime remains liberal; 100% foreign ownership is permitted in all sectors except for longline fisheries (since 2010) and retail trade. As of 2014 the positive list of foreign investment activities was replaced by a case-by-case review of each application. In addition to the 2015 constitutional changes opening land ownership to foreign investors, SEZs incentives applicable to both domestic and foreign investors, an equitable BPT (replacing the disadvantageous royalty regime), and dispute settlement guarantees were introduced recently.

5. During the review period, Maldives has been through a complex political transition period. Some changes were made in its legal and institutional framework for trade and investment, including new legislation or amendments, inter alia, on customs valuation, public health, taxation, copyright and related rights, tourism, land lease and financial services as well as the establishment of a Trade Facilitation Committee to advise on issues in facilitating trade and ease of doing business in the country.

6. The graduation of Maldives from least-developed-country (LDC) status in 2011 and/or its classification as an upper-middle-income country by the World Bank have had some implications for preferential market access to certain major markets (i.e. Canada, China and the EU), some WTO commitments/benefits (e.g. TRIPS), and possibly the level of official development assistance


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and technical assistance. Its involvement in regional trade agreements remains limited and unchanged; it is a party only to the South Asian Free Trade Agreement (SAFTA) and is about to launch negotiations for a free trade agreement with China. Despite a seemingly transparent legislative process and being a longstanding beneficiary of trade-related technical assistance (TRTA), Maldives' poor record of WTO notifications and observance of tariff binding commitments remains virtually unchanged.

7. The tariff remains one of Maldives' main trade policy instruments but its predominance as a source for government revenue has declined substantially with the introduction of new taxes. As a consequence of a 2011 unilateral MFN tariff liberalization initiative eliminating tariffs on about 31.5% of tariff lines, the average applied MFN tariff rate dropped from 21.4% in 2008 to 13.9% in 2015. Agricultural products continue to face lower tariff rates (averaging 11.3%) than non-agricultural items (WTO definition) (14.3%). The peak ad valorem rate was doubled to 400% (plastic bags and polythene film and sheets). The introduction of the HS2012 tariff nomenclature resulted in 7% less tariff lines. The tariff structure has become slightly more complex owing to the increase in the number of applied MFN rates, which in 2015 stood at 13 (zero, 5%, 10%, 15%, 20%, 25%, 35%, 50%, 100%, 150%, 200%, 400%, one specific duty) compared to 11 in 2009. For most activities, the tariff is characterized by some level of de-escalation between unprocessed and semi-processed products, and escalation to fully processed goods, which means that effective rates of tariff protection for final products can be considerably higher than nominal rates. The Maldives Customs maintains an online Customs Tariff containing only 6,422 "active" tariff lines for customs declaration purposes that could provide scope for administrative discretion. The fact that 94.9% of tariff lines are bound imparts a degree of predictability to the tariff. However, the simple average of bound MFN rates could considerably exceed the average applied MFN rate (possibly by about 24 percentage points), providing the authorities with extensive scope for increasing applied tariffs within bindings. Furthermore, similar to the time of its past TPR, applied MFN tariff rates appear to exceed bound rates on some 323 tariff lines of which 271 were on manufactured products. As Maldives' Tariff Schedule of Concessions is based on the HS2007 it is difficult to accurately compare its bindings' status with the currently applied HS2012 tariff schedule, thus, making the transposition of binding commitments to HS2012 another pressing task.

8. During the review period, trade facilitation improvements included the introduction of a fast clearance channel for imports as well as the launching of the internal process to ratify the WTO Agreement on Trade Facilitation. New customs legislation in 2011 allowed for the implementation of provisions of the WTO Agreement on Customs Valuation; the transaction value is now used in a large majority of cases as the valuation basis.

9. Import licensing continues to apply to all imports, and an ad valorem fee is collected for the issuance of licences. Import restrictions and prohibitions on various items for, inter alia, religious, health, safety, security, and environmental reasons have remained generally unchanged during the review period. There has been no major change in the area of standards and other technical requirements. Labelling requirements for pre-packaged food, food imports, tobacco products and breast-milk substitutes have been updated.

10. Export duties levied on fish products (royalties) were replaced by the BPT indirect tax as from 2012, whereas a 50% duty on the f.o.b. value of ambergris exports was retained for revenue purposes. No changes were made to export prohibitions, restrictions, or the licensing regime. As from 2014 incentives, inter alia, involving temporary BPT exemption, have been provided for the establishment of SEZs, including for export processing, but no such zone has been set yet.

11. Domestic support is provided mainly through tax and non-tax incentives (e.g. direct payments) some of which are available to sector-specific activities, e.g. fisheries, agriculture and energy sectors. State involvement in the economy, including in trading activities, remains prevalent in numerous sectors (e.g. fishing, public utilities, finance, telecoms, transport, and tourism). Despite the absence of privatization action during the review period, the authorities promoted joint ventures between government-owned companies and private sector stakeholders and in 2013 they passed legislation on the procedures for the privatization, corporatization, monitoring, evaluation and introduction of shares of state-owned properties to the stock exchange. No major changes were made in the government procurement framework of Maldives, a non-signatory to the WTO Plurilateral Agreement on Government Procurement; in addition to the possibility of restricting bids to domestic suppliers, local firms may be granted a margin of preference of up to 7.5% in the evaluation of bids.


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12. The passing of a Copyright and Related Rights Act in 2010 has been a major development in the protection of intellectual property rights (IPRs) while the preparation of draft legislation on patents, industrial designs, trademarks and geographical indications is under way. Maldives remains a non-signatory to any of the treaties administered by the World Intellectual Property Organization and protection enforcement is weak. Competition and bankruptcy and insolvency legislation remains at a drafting stage, although sector-specific legislation is in place for telecommunications.

13. Despite its declining share of GDP (1.4% in 2015) the fisheries sector continues to be of major importance to the Maldivian economy as it accounts for nearly all (97.4%, 2014) merchandise exports; following the loss of preferential treatment in the EU market some fish exports were partly diverted into other markets. During the review period, tariff protection for the activity was reduced significantly, although most tariff lines relating to fish and fish products remain unbound. Fisheries subsidies are in the form of direct payments are granted to support fuel costs (2009-14), a minimum income level during the low season (2014 onwards) and installation of equipment for on-board ice making facilities and for conversion of bigger fishing vessels to engage in longline fishing. The longline fishing policy and regime were changed to reflect illegal fishing and overfishing developments as well as domestic fishermen's interests/concerns; foreign participation in this type of fishery was ceased in 2010 and a catch allocation-based individual transferable quota (ITQ) scheme was established in 2014. The state-owned Maldives Industrial Fisheries Company (MIFCO) continues to enjoy considerable monopsony power as it holds exclusive rights in purchasing and processing skipjack tuna in two of four zones.

14. Notwithstanding its land limitations and climatic risks, agriculture remains a crucial sector in terms of employment and therefore poverty reduction. Domestic producers receive support in the form of direct payments mainly distributed to compensate for loss of income due to natural disasters; as from 2014 the direct payments were replaced with insurance schemes for farmers as well as concessional loans to support agricultural development. While average tariff protection to agriculture was reduced, tariffs on tobacco and alcohol products were increased for health, religious and revenue purposes. Staple foods (i.e. ordinary rice, flour and sugar) continue to be imported mainly through the majority government-owned enterprise State Trading Organization (STO) and sold at government-controlled prices involving a subsidy.

15. Development of manufacturing remains limited and state involvement seems to persist in a few key areas through, inter alia, STO's and MIFCO's activities. Although tariff protection of manufacturing was reduced – except for some chemicals, cosmetics, soaps, tyres, textiles, motor vehicles, buses, and motor vehicle parts where it was increased – it remained slightly higher than the overall average applied MFN tariff and much higher than rates levied on agricultural items.

16. Maldives remains fully import dependent on petroleum-based fuels with key activities like tourism and fishery being the main energy consumers. Action is being taken both at the border and investment level to promote renewable energy and address several constraints. State involvement in the energy sector was strengthened with the establishment of a second state-owned electricity company to achieve operational efficiency and ensure 24-hour electricity access to island communities. As electricity tariffs remain expensive by international standards, two types of subsidies equivalent to 0.7% of GDP (2014) are paid directly to households, some of which also benefit from cross-subsidization at the expense of businesses subject to much higher tariffs.

17. Services remain by far the largest sector of the economy (accounting for more than 80% of GDP and over 90% of total goods and services exports) with tourism being the largest activity and the largest generator of government revenue. The limited commitments of Maldives under the GATS remain unchanged. Tourism-related taxes and revenue were increased during the review period. Although tourism facilities are predominantly locally-owned, state involvement was apparently increased, and the lease period for islands or land was extended under certain conditions. New legislation in the financial sector covered Islamic banking, prudential requirements and prevention of money laundering and terrorism financing. Consequently, to capture a part of the market, a new Islamic bank was established and the offer of Shariah type financial products was expanded. The banks' capital adequacy ratio rose, but their minimum reserve requirement was reduced. Despite a recent drop, the relatively high level of non-performing loans (NPLs) remains a concern. State involvement in fixed-line communications was somewhat reduced in recent years with the state firm's (Dhiraagu) opening to public investment in late 2011; efforts were made to reduce its dominance in other telecoms segments. Other major developments


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include a new National Broadband Policy aimed, inter alia, at extending broadband Internet access to all the inhabited islands as well as the introduction of mobile number portability and the extension of the existing broad-based GST tax to telecommunications. Cabotage restrictions persist in both maritime and air transport activities. During the review period, the supply of international airline services was increased with the arrival of new operators and the expansion of airport capacity whereas a lower GST rate has benefited the domestic air transport of locals. On the other hand, state involvement in port and airport ownership and handling remained relatively unchanged.

18. Despite a favourable economic outlook Maldives' economic growth is expected to slow further in 2016 with the implementation of fiscal adjustments contained in the 2015 Budget. Downside risks to the economic outlook are posed by, inter alia, possible fiscal slippages, the timely implementation of proposals to diversify into new and tourism-support activities, and political volatility. With limited policy buffers, Maldives' economy also remains vulnerable to exogenous risks including a surge in oil prices, protracted slow growth in its major markets (mainly Europe, and increasingly China), as well as a strengthening of the U.S. dollar. International competitiveness is crucial to the sustainable development of Maldives' tourism-dependent economy given its high degree of openness and regional competition. A major economic challenge confronting Maldives, with potential trade policy implications, is to formulate appropriate macroeconomic policies and undertake productivity-enhancing structural reforms to address, inter alia, skill mismatch in the labour market, the high dependence on fishing, tourism and oil imports, and government expenditure-related distortions (e.g. subsidies) as well as improving the efficiency of public service provision across the country. These and related reforms would increase the flexibility of the Maldivian economy and its ability to respond to external shocks, thus enabling it to continue meeting its economic and welfare objectives.


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1 ECONOMIC ENVIRONMENT

1.1 Overview

1.1. Since its previous Trade Policy Review in 2009, Maldives' economic growth has been sustained, although at an irregular and slower pace. Its ability to attract tourism from new and emerging markets (e.g. China, Section (4.5.2)) has helped its recovery from the global economic recession.1 International competitiveness is crucial to the economy given its high degree of openness (Section 1.6). Inflation peaked at 10.9% in 2012, reflecting both domestic and external factors; the unemployment rate declined to 11.2% in 2012. Maldives has improved its human development performance and reduced its income inequality level2, supported by high levels of government expenditure on human development.3 International trade and foreign direct investment (FDI) developments reflect the continued importance of Asia as Maldives' main regional market and supplier, while the European Union remains its major merchandise market followed by Thailand.

1.2. Maldives shares many of the challenges of other small island developing states, including: high cost of public service provision and limited ability to exploit economies stemming from its small size; dependence on a few sectors; limited access to international markets due to its remoteness; and vulnerability to climate change and high cost of natural disasters.4 Despite a favourable economic outlook and some success in diversifying its production/export base from traditional fishing into tourism, risks to the economy remain.5 Domestic risks stem from possible fiscal slippages and the timely implementation of proposals to diversify into new labour-intensive sectors such as off-port shipping, information technology, financial services and tourism-support activities (Sections 1.3.2 and 2.7). With limited policy buffers, the risks of fiscal slippages are high and Maldives' highly dollarized economy is vulnerable to external shocks.6 The main external risks include protracted slow growth in its major markets (mainly Europe, and increasingly China), as well as a strengthening of the U.S. dollar. As at end-October 2015, the authorities considered risks to growth as coming mostly from the tourism sector as growth in arrivals was less than anticipated and the average duration of stay was on a downward trend.7

1.2 Recent Economic Developments

1.2.1 Growth, income, and employment

1.3. Since the global financial crisis, Maldives' growth has resumed although remaining below its pre-crisis performance. After a decline of 5.3% in 2009 as a result of the global economic recession, real GDP growth peaked to 8.7% in 2011 (Table 1.1). It decelerated to 2.5% in 2012 largely due to the impact of domestic political unrest (Section 2.2) and weak economic conditions in Europe in the tourism sector. As a result of increased tourism demand and related sectors real GDP rebounded to 4.7% in 2013 and rose slightly to 6.5% in 2014.8 According to the IMF, GDP growth is forecast to remain fairly strong at 5% in 2015 and to slow down to 3.9% in 2016 with the implementation of fiscal adjustments contained in the 2015 Budget (Section 1.3.2).

1 Tourism contributes directly and indirectly to 78.1% of GDP (Section 4.5.2), and the impact of the

global economic recession has been more severe than in other tourism-dependent economies. Maldives Monetary Authority (2014).

2 In 2013, Maldives, which is in the UNDP's medium human development category, ranked 103rd out of 187 countries (104th out of 187 in 2008). Its income inequality index (Gini coefficient) dropped from 0.41 in 2004 to 0.37 in 2009-10; a value of 0 represents absolute equality, a value of 1 absolute inequality. UNDP (2014b); and UNDP (2014a).

3 Over the past decade, public expenditure on education averaged 8.1% of GDP, and around 10% of the budget was allocated annually to the health sector. A wide range of social protection programmes has recently been introduced, including: the universal health insurance scheme, old age basic pension, electricity benefit, and retirement pension. Ministry of Economic Development (2013).

4 Asian Development Bank (2015c). 5 IMF (2015). 6 Plans to improve infrastructure and develop special economic zones (SEZs) (Section 1.3.2) are

expected to support growth and help build buffers. With tourist transactions mainly in U.S. dollars, the economy is highly dollarized.

7 MALDIVES MONETARY AUTHORITY(2015b). 8 Tourism demand picked up in 2013 as Maldives is increasingly diversifying into the Chinese market.

Arrivals grew by 17% and drove up other sectors such as the construction, communications, and fisheries.


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Table 1.1 Selected macroeconomic indicators, 2009-14 2009 2010 2011 2012 2013 2014 Real GDP (% change) -5.3 7.2 8.7 2.5 4.7 6.5 Real GDP at market price (Rf million, 2003 prices) 19,563.9 20,966.0 22,791.9 23,361.4 24,458.9 26,043.7 Real GDP at market price (US$ million, 2003 prices) 1,528.4 1,638.0 1,560.9 1,520.4 1,591.7 1,693.3 Current GDP at market price (Rf million) 27,510.5 29,739.8 35,768.3 38,693.0 42,952.2 47,122.0 Current GDP at market price (US$ million) 2,149.3 2,323.4 2,449.5 2,518.3 2,795.1 3,063.8 GDP per capita US$ 5,629.7 5,926.3 6,055.5 6,034.6 6,225.8 6,738.9 Unemployment rate (%) 12.2 11.7 11.5 11.1 11.6 .. Prices and interest rates Inflation - Male (CPI, % change) 4.5 6.1 11.3 10.9 4.0 2.4 Lending rate (foreign currency) 13.00 10.38 10.20 10.48 11.14 11.42 Lending rate (national currency) 13.00 8.37 8.30 8.67 8.60 8.50 Saving rate (foreign currency) 6.50 4.05 4.17 3.73 3.81 4.14 Saving rate (national currency) 6.50 3.94 3.92 4.04 3.76 3.23 Exchange rate Rf/US$ (year average - IMF) 12.800 12.800 14.602 15.365 15.367 15.380 Overall fiscal balance (% of GDP)

Revenue and grants 20.8 22.0 27.7 26.2 27.7 31.6 Current revenue 19.3 21.3 24.1 25.1 26.8 30.5

Tax revenue 9.9 9.9 13.7 17.8 20.7 22.1 Expenditures and net lending 39.8 36.4 34.3 33.9 31.5 34.8 Net operating balance (excl. net lending) -19.0 -14.4 -6.6 -7.7 -4.1 -3.4

Government debt 52.0 59.0 59.5 61.7 67.0 74.6 Domestic debt 28.0 32.0 30.0 33.5 35.0 44.0

External sector (% of GDP, unless otherwise indicated)

Current account .. .. -15.7 -7.3 -4.6 -4.1 Net merchandise trade .. .. -55.9 -50.1 -49.1 -54.2

Exports .. .. 14.1 12.5 11.8 9.8 Imports .. .. 70.1 62.6 60.9 64.0

Services balance .. .. 62.2 63.9 67.8 72.8 Receipts .. .. 85.9 86.5 92.7 98.8

Travel .. .. 79.2 77.8 83.5 88.0 Payments .. .. 23.7 22.7 24.9 26.0

Capital account .. .. 1.2 0.7 0.3 0.2 Financial account .. .. 17.0 7.5 2.4 16.5

Direct investment .. .. 17.3 9.1 12.9 12.1 Balance of payments .. .. -0.6 -1.2 2.3 8.1 Trade to GDP ratio (%) .. .. 193.9 184.2 190.4 198.6 Merchandise goods exports (% change)a .. .. .. -9.2 5.3 -9.1

Merchandise goods imports (% change)a .. .. .. -8.2 8.1 15.1

Service exports (% change)a .. .. .. 3.5 19.0 16.8

Travel .. .. .. 0.9 19.3 15.4 Service imports (% change)a .. .. .. -1.8 22.1 14.4

Gross international reserves (US$ million) 261.0 350.2 334.9 304.5 368.3 614.7 in months of imports 3.3 3.9 2.7 2.4 2.5 3.7

External debt (US$ million) 933.7 950.2 903.7 810.9 792.7 738.5 Debt service ratiob .. .. 2.6 2.9 2.1 2.3

.. Not available.

a Growth rates on merchandise goods and services trade are based on US$, as taken from the BOP. b Rates of debt service to exports of goods and services.

Source: Maldives Monetary Authorities online information; National Bureau of Statistics, Ministry of Finance and Treasury online information; IMF online information; and World Development Indicators, viewed at: http://data.worldbank.org/country/maldives.

1.4. Since 2009, changes in the overall sectoral pattern of Maldives' GDP has consisted of a rise in the contribution of construction which accounted for 13.2% of economic activity in 2014, and a decline in fisheries (due largely to the decline in fish catch), financial services and real estate (Table 1.2).

1.5. During the review period, the unemployment rate declined from 12.2% in 2009 to 11.1% in 2012 due mainly to the recovery in the tourism sector, but rose to 11.6% in 2013 (Table 1.1). Youth unemployment is, however, on a rising trend owing to a mismatch in the skills required in the job market and the unavailability of these skills among locals.9 The informal economy plays an

9 UNDP (2014b).


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important role in creating jobs and livelihood opportunities, especially in the outer islands.10 Measures taken to encourage the formalization of informal enterprises include: a dedicated programme providing business support services (including concessionary financing for business start-up and development); the Business Profit Tax Act and the Goods and Services Tax Act of 2011 (Sections 1.4.1 and 3.4.2), which require enterprises to register for tax purposes; the Small and Medium Enterprises Act of 2012, which provides incentives tied to registration; and the Business Registration Act of 2014 (Section 2.7). According to the authorities, registration of businesses operating in the informal economy has improved as a result of these measures.11

Table 1.2 Basic economic indicators, 2009-14

2009 2010 2011 2012 2013 2014 GDP by economic activity at constant 2003 prices (% change) Agriculture and mining -2.3 4.1 3.0 0.5 2.4 1.2 Fisheries -2.6 -5.7 -1.1 -0.7 8.2 -0.9 Manufacturing -19.8 -6.9 2.8 2.9 -6.5 0.9 Electricity and water supply 7.4 9.1 7.6 3.7 5.2 7.9 Construction -37.3 9.3 19.0 -1.2 -13.1 21.4 Services 1.7 8.0 5.8 1.5 6.4 5.0

Wholesale and retail trade -11.3 0.6 10.4 7.0 11.4 8.1 Tourism (resorts, etc.) -5.4 15.8 9.2 -0.1 9.0 4.0 Transport 1.2 17.0 7.0 -1.3 4.2 7.2 Communication 22.3 1.9 8.4 4.7 10.2 8.6 Financial services -4.9 5.0 3.0 0.2 1.8 2.4 Real estate -0.1 3.4 1.8 1.3 3.8 4.2 Business services -4.2 4.3 3.4 0.3 2.0 2.6 Government administration 10.0 1.7 -0.5 2.9 4.1 4.3 Education 7.5 2.1 2.9 3.2 -0.5 2.7 Health 14.2 1.3 1.0 1.0 2.1 4.7 Social services -15.5 1.2 1.1 2.6 -5.3 -2.5

Share of main sectors in current GDP (%, basic price) Agriculture and mining 2.1 2.2 2.2 2.2 2.2 2.0 Fisheries 2.2 2.1 1.9 1.6 1.7 1.5 Manufacturing 4.7 4.3 5.4 6.0 5.3 5.0 Electricity and water supply 1.4 1.5 1.4 1.3 1.2 1.1 Construction 8.9 9.7 11.9 12.1 10.9 13.2 Services 85.2 84.7 81.7 81.4 83.4 81.8

Wholesale and retail trade 3.8 3.9 4.1 4.2 4.4 4.4 Tourism (resorts, etc.) 27.3 28.7 28.7 28.4 30.2 29.2 Transport 7.1 7.5 7.1 7.4 7.6 7.4 Communication 5.6 7.0 6.0 5.8 5.5 5.2 Financial services 6.2 6.3 5.7 5.5 5.3 5.1 Real estate 7.1 7.0 6.4 6.2 6.0 5.7 Business services 1.1 1.1 1.0 1.0 0.9 0.9 Government administration 16.4 14.2 14.4 14.7 15.6 16.5 Education 5.5 4.5 4.3 4.2 4.0 3.7 Health 4.0 3.4 3.2 3.1 3.1 2.9 Social services 1.2 1.0 0.9 0.9 0.8 0.8

Financial services indirectly measured -4.6 -4.6 -4.6 -4.6 -4.6 -4.6

Source: National Bureau of Statistics, Ministry of Finance and Treasury, Statistical Yearbook of Maldives 2015 online information.

10 There is no data on the informal sector or informal employment. However, the Household Income and

Expenditure Survey it to capture the informal sector and informal employment. 11 Online information. Viewed at: http://www.unsiap.or.jp/e-

learning/el_material/PSS/1507_Informal/cr/MDV_cr.pdf.


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1.2.2 Prices

1.6. Inflation peaked at 11.3% in 2011 and remained high in 2012, reflecting both domestic and external factors. On the domestic side, the pass-through effect of the April 2011 depreciation of the rufiyaa (Section 1.3.1), the introduction of the goods and services tax (GST), and surging domestic fish prices were the main drivers.12 External factors were mainly higher global food, energy and commodity prices. Inflation dropped to 4% in 2013 and remained subdued in 2014, inter alia, on account of the waning effect of these factors. According to the IMF, inflation is projected to ease further to 0.3% in 2015 but to pick up (2.1% in 2016) with the full year effect of the increase in import duties (Section 1.3.2), and to settle at around 4% in the medium-term (2018 and 2019).13 The authorities indicated that inflation will remain contained in 2015 as oil and commodity prices remain low and the projected increase in import duties did not materialize.

1.3 Main Macroeconomic Policy Developments

1.3.1 Monetary and exchange rate policy

1.7. Monetary policy remains the responsibility of the Maldives Monetary Authority (MMA). Key decisions relating to monetary policy are recommended by the Monetary Policy Committee for approval by the MMA Board of Directors, its highest decision-making body. However, the MMA needs approval from the President for any changes in the exchange rate. The MMA remains committed to its objectives of maintaining price stability and an adequate level of international reserves, while promoting non-inflationary economic growth.14 The exchange rate is the main anchor for price stability and the liquidity position of the banking system is used as the operational target for monetary operations. The main instruments used by the MMA are: the Minimum Reserve Requirement (MRR); open market operations (since 2009); and standing facilities (since 2010). MMA's interventions over the past years have consisted mainly in injecting or absorbing excess liquidity in the banking sector. Between 2014 and 2015, the MMA cut the MRR from its level (25% since 2006) to 10%, in a move to reduce financing costs (Section 4.5.3.1.2).15 During the review period, monetary policy occasionally accommodated fiscal indiscipline through the MMA's provision of credit to fund budget deficits.16 Under the Fiscal Responsibility Act of 2013, strict limits were imposed on monetary accommodation (Section 1.3.2), and financing of the fiscal deficit was halted.17

1.8. During the review period, Maldives passed from a de facto fixed exchange rate to a stabilized exchange rate regime which, according to the IMF, is suitable for Maldives in view of the very high openness of its goods and services market, the dollarized nature of the economy, and the large seasonal variation in tourism revenues. The rufiyaa has been pegged to the U.S. dollar at the rate of Rf 12.80 per U.S. dollar (since July 2001); however, maintaining the peg became unsustainable as persistent foreign exchange shortages were exacerbated by a sharp decline in foreign exchange earnings during the global economic crisis. With effect from 11 April 2011, Maldives switched to a stabilized exchange rate regime with the rufiyaa allowed to fluctuate within a horizontal band of 20% on either side of a central parity of 12.85 per U.S. dollar (i.e. between Rf 10.28 and 15.42 per U.S. dollar).18 The nominal exchange rate moved quickly towards the upper limit of the band where it remains, as foreign exchange pressures persist (Table 1.1); at the same time the rufiyaa appreciated against the currencies of most of its major trading partners (mirroring the strengthening of the U.S. dollar). Following the April 2011 devaluation, the real exchange rate quickly appreciated by around 20% owing to rapid inflation pass-through.19 According to the IMF, the exchange rate was modestly overvalued in 2014.

12 Maldives Monetary Authority (2014). 13 IMF (2015). 14 IMF (2015). 15 Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/mpolicy.php. 16 In 2013, net credit to the Government increased by 27.7% to Rf 6 billion (Maldives Monetary

Authority, 2014). 17 The provisions of the Fiscal Responsibility Act related to monetization were delayed until 2014. The

Act was fully implemented in May 2014. 18 Maldives Monetary Authority Press release No. PR/GB/2011/7 (unofficial translation). Viewed at:

http://www.mma.gov.mv/PRGB20117English.pdf. 19 Exchange rate devaluations have been unsuccessful (the latest being the 2011 experience) as the

rapid inflation pass-through offset the impact of the nominal exchange rate devaluation. IMF (2015).


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1.9. Since the global financial crisis, the appearance of a parallel market premium and a shortage of foreign exchange at the official rate has continued to give rise to non-discriminatory exchange restrictions and a multiple currency practice (MCP). With a low level of reserves, the MMA was able to supply only a small fraction of foreign exchange demand, with the excess satisfied in the parallel market, and the premium has remained stable and low for an extended period; the scale of the premium has ranged from around 5% to 15%, and during 2014 it reverted to just 3% to 4% due to an increased supply of U.S. dollars (Section 1.5).20 The tourism industry appears to be a key supplier and driver of the parallel market. The existing restriction arising from rationing has eased, with the MMA increasing the foreign exchange provided to commercial banks from US$3 million to US$4 million a week from September 2013.

1.3.2 Fiscal policy

1.10. During the period under review, the fiscal deficit was reduced from 19% of GDP (based on net operating balance figures) in 2009 to 3.4% in 2014 (Table 1.1), partly due to the recovery in the tourism sector and the introduction of new tax measures (Sections 1.4.1 and 3.4.2). The Fiscal Responsibility Act of 2013 set a number of rules relating to public debt and fiscal deficit.21 The 2015 Budget measures aim to rein in the deficit through a mix of revenue raising and expenditure restraint measures as well as a large increase in capital expenditures (for a Male airport road bridge and for airport development) financed by official bilateral loans. Planned revenue raising measures included a tourism "green tax"; increased import or excise duties on some consumer items; fees from the acquisition of land for special economic zones (SEZs) (Sections 2.7, 3.4.2.3, 4.3.2, and 4.5.3); and licence fees for new resorts. A freeze in public sector employment and targeting electricity and food subsidies are expected to contain expenditures. However, the risks of slippages are high, and some have already materialized.22 They include: the possible reversal of the planned increase in import duties for motorcycles and textiles; downward revision of tourist arrivals and its impact on revenues from the tourism goods and services tax (GST); and delays in targeting electricity subsidies. The Fiscal Responsibility Act of 2013 stipulates that the primary balance of the budget is to be in surplus by the end of 2017, and the overall balance is to be maintained at a level not exceeding 3.5% of GDP. In the proposed 2016 Budget, expenditures are projected to increase by 12.7% to Rf 27.5 billion (US$1.7 billion) to accommodate government spending, mostly on public investment projects.23 As a result, the deficit is expected to widen to Rf 3.4 billion.

1.4 Main Structural Policy Developments and Challenges

1.4.1 Tax and fiscal reform

1.11. During the period under review, tax reform plans included the introduction of the GST and the business profit tax (BPT) aimed at reducing the vulnerability of government revenues to external shocks as well as tax and non-tax incentives (Sections 1.2.1 and 3.4.2). The Maldives Inland Revenue Authority was also established as an independent body for tax administration. Revenue raising and expenditure restraint measures were planned at the 2015 Budget (Section 1.3.2).

1.4.2 Subsidies reform

1.12. Subsidies remain in place in the fisheries, agriculture and energy sectors (Sections 4.2.2.4, 4.3.2, and 4.4.2). Basic foodstuffs (flour, rice, sugar) are imported by a state-trading entity and sold at officially-set prices (Sections 3.2.7 and 4.2.2.4). Plans to reduce energy subsidies are under consideration (Section 4.4).

20 IMF (2015). 21 Under the Act rules relating to public debt require: the interest rate on loans from the MMA to be at

the prevailing market rate, the repayment period not to exceed 91 days, and the loan amount not to exceed 1% of the average government revenue of the past three years; the Government to bring the level of the national debt below the threshold of 60% of the total GDP of the preceding year by the end of 2017; and loans to be taken only if they are for national development projects or to facilitate the improvement of productivity.

22 Maldives Monetary Authority (2014). 23 Online information, viewed at: http://www.haveeru.com.mv/news/63893.


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1.4.3 State-owned enterprises (SOEs)

1.13. State-owned enterprises are operating in various sectors of the economy and may benefit from direct or indirect support such as government guarantees on debt and exemption from certain regulations (Section 3.4.7).

1.4.4 Labour market reform

1.14. Maldives' legal and institutional framework for workplace relations remains virtually unchanged. There is no minimum wage set for the private sector. The authorities indicated that there is no plan to do so, as it would adversely affect productivity.24 However, a de facto benchmark floor of Rf 5,000 (US$320) per month is in place for public sector employees.

1.4.5 Pension reform

1.15. A new pension system was introduced in 2009.25 Unlike the former system which covered only public sector employees, the new scheme was extended gradually to the private sector, self-employed and foreign workers.26 Participation for self-employed and foreign workers is non-mandatory. By the end of 2013, there were more than 120,000 workers enrolled into the new scheme, and the accumulated pension savings is projected to reach US$300 million by the end of 2016. The lack of allowable investment opportunities is one of the major impediments to the success of the new system. Over 85% of pension savings are being invested in short-term government securities. Transitional benefits, which were put in place before the new pension scheme becomes fully functional, were never phased out. In addition, institution-specific pensions and benefits emerged resulting in the duplication of retirement benefits and pressures on the budget. As a consequence, pensions doubled from 2012 to 2013 and accounted for 2.2% of GDP. Pension pay-outs to public sector employees receiving double pension benefits are projected to reach US$11 million in 2016 (from US$3.5 million in 2010).

1.5 Balance-of-Payments Developments

1.16. During the review period, the current account remained in deficit. In 2011, it rose to US$383.4 million, reflecting higher global oil prices and a surge in imports of construction materials stemming from the revival of some public sector projects and the launch of new ones.27 The deficit narrowed in 2012 and 2013 owing mainly to the recovery in the tourism sector, and subdued global food and fuel inflation in 2013.28 Although the merchandise trade balance deteriorated further in 2014, it was largely offset by a significant increase in receipts from travel services. The deficit was expected to peak at US$399.9 million in 2015 due to a reduction in the trade surplus reflecting stronger domestic import demand and a fall in fish exports and re-exports. According to the authorities, the deficit would be around the same level in 2016.

1.17. Persistent primary fiscal deficits have led to a high and increasing level of public debt. Total public debt increased from 52% of GDP in 2009 to 74.6% in 2014 (Table 1.1), well above the 60% limit imposed by the Fiscal Responsibility Act. Maldives' public debt problem is largely a domestic one, as domestic debt increased from 28% to 44% of the GDP over the same period. Gross external debt decreased by 20.1% to US$738.5 million (Table 1.1); the debt service ratio declined to 2.3% in 2014 (from 2.9% in 2012).29 The ADB noted in its 2015 Economic Outlook30 that debt sustainability is a risk because of the Government's plans to massively scale up public capital investment over the next three years (with at least 30% financed through loans), and the demonstrated difficulty of cutting back current spending.

24 Online information, viewed at: http://www.haveeru.com.mv/news/63957. 25 Maldives Pension Act of 2009. 26 World Bank (2014b). 27 Maldives Monetary Authority (2012). 28 Maldives Monetary Authority (2014); and IMF (2015). 29 Due to ongoing data revisions, the debt service ratio is only available from 2011 onwards. 30 Asian Development Bank (2015a).


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Table 1.3 Balance of payments, 2011-15

(US$ million) 2011 2012 2013 2014 2015a Current account -383.4 -184.5 -127.4 -124.6 -399.9 Goods and services balance 153.0 346.8 523.6 570.2 286.3

Goods balance -1,370.5 -1,261.4 -1,372.0 -1,660.0 -1,896.9 Exports 346.4 314.4 331.0 300.9 241.9 Imports 1,716.8 1,575.8 1,703.0 1,960.9 2,138.8

Services balance 1,523.5 1,608.2 1,895.6 2,230.2 2,183.2 Receipts 2,104.5 2,178.9 2,592.1 3,026.8 3,048.7

Travel 1,940.2 1,958.0 2,335.2 2,695.7 2,644.6 Payments 581.0 570.6 696.6 796.6 865.5

Income balance -294.7 -272.1 -363.7 -370.2 -328.2 Current transfers -241.8 -259.2 -287.2 -324.7 -358.1 Capital account 28.5 17.4 7.9 6.6 46.3 Financial account 416.6 187.7 67.4 507.0 301.7

Direct investment 423.5 228.0 360.8 371.5 333.2 Direct investment in Maldives 423.5 228.0 360.8 371.5 333.2

Portfolio investment 0.1 53.1 -53.3 -17.2 -4.6 Other investment -7.1 -93.4 -240.1 152.8 -26.9

Net errors and omissions -76.7 -51.0 115.9 -141.9 26.9 Balance of payments -15.2 -30.4 63.8 247.2 -25.0

a Estimates.

Source: Maldives Monetary Authority online information. Viewed at: http://mma.gov.mv/statis.php.

1.18. Maldives' gross official reserves increased from US$261 million in 2009 to US$614.7 million (3.7 months of merchandise imports) in 2014 (Table 1.1). In 2014 alone, the increase amounted to US$246 million as a result of a large improvement in net capital inflows.31 Nevertheless, according to the IMF they were low compared to standard reserve adequacy indicators (around 2.8 months imports) as usable reserves were just US$132 million (0.6 months imports).32 As of September 2015, gross international reserves stood at US$627 million.

1.6 Developments in Merchandise Trade

1.19. The high openness of Maldives' economy to international trade, and its integration into the world economy, continued to be reflected by the high ratio of its trade (exports plus imports) in goods and services to GDP. The ratio increased from 193.9% in 2011 to 198.6% in 2014, largely due to an increase in travel receipts (Table 1.1).

1.20. The composition of merchandise trade remains concentrated in a few items, especially for exports. Marine food (mainly fish, crustaceans, and preparations thereof) remains Maldives' main exports (Chart 1.1). In 2012, domestic exports almost doubled to US$161.6 million (Table A1.1) thanks to higher exports resulting from an improvement in fish landings, and higher international fish prices; the level of re-exports remain particularly high. The composition of merchandise imports remained broadly unchanged (mainly involving manufactured products, intermediate inputs for the apparel industry, food, and fuels). The share of agricultural products in total imports dropped slightly to 22.9% while the share of fuels increased from 20.7% to 28.7%, reflecting increased energy demand due to the economic activity (operation of new resorts, new regional airports, etc.).

1.21. Merchandise trade is oriented towards Asia, although the EU remains the major market for Maldives' merchandise exports (almost exclusively fish). There was a minor shift away from the markets of the EU (possibly reflecting a reduction in GSP privileges (Section 2.6.4)) and Sri Lanka, towards Thailand and the United States which were, together with the EU, the main individual export destinations in 2014 (Chart 1.2). During the same period, the share of the United Arab Emirates (Maldives' major merchandise suppliers as of 2014 owing to the increased demand in energy) in total imports rose while those of Singapore and India dropped (Chart 1.2).

31 World Bank (2015b). 32 Low reserves levels also indicate external sector weakness. IMF (2015).


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Chart 1.1 Product composition of merchandise trade, 2009 and 2014

2009 2014

(a) Domestic exports (f.o.b.)

Total: US$76.7 million Total: US$144.8 million

(b) Imports (c.i.f.)

Chemicals6.0%

Transportequipment

6.7%

Manufactures52.8%

Electrical machines

10.1%

Non-electrical machinery

7.0%

Electricalmachines

7.9%

Other semi-manufactures

9.4%

Chemicals6.0%

Manufactures46.3%

Total: US$966.1 million Total: US$1,992.7 million

Other2.4%

Other consumer goods 9.4%

Other consumer goods 11.8%

Other mining2.3%

Other semi-manufactures

11.1%

Other 3.4%

Agriculture22.9%Agriculture

24.3% Transport equipment

7.0%

Fuels28.7%Fuels

20.7%

Non-electrical machinery

6.6%

Fish, crustaceans, etc. & preparations

thereof96.4%

Other mining2.2%

Fish, crustaceans, etc. & preparations

thereof97.4%

Note: Including re-exports, exports totalled US$169.0 million and US$300.9 million, respectively, in 2009

and 2014.

Source: UNSD, Comtrade database (SITC Rev.3), and Maldives Monetary Authorities online information.


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Chart 1.2 Direction of merchandise trade, 2009 and 2014

2009 2014

(a) Exports (f.o.b.)

Total: US$76.7 million Total: US$144.8 million

EU289.4%

China2.7%

Americas9.6%

Other2.2%

(b) Imports (c.i.f.)

EU288.8%

Other2.2%

United Arab Emirates15.7%

Americas4.0%

Total: US$966.1 million Total: US$1,992.7 million

Singapore 17.5%

Bahrain4.0%

United States9.0%

Sri Lanka6.0%

Thailand32.2%

Sri Lanka6.5%

Other Asia3.5%

EU2837.0%

India12.1%

Other4.4%

Other Asia7.7%

EU2842.5%

Australia2.8%

Chinese Taipei2.5%

Iran, Islamic Rep.5.9%

Thailand4.4%

Other Asia6.0%

Thailand5.0%

Other Asia 6.1%

Other3.8%

Malaysia7.3%

Sri Lanka17.1%

Malaysia6.6%

United ArabEmirates23.7%

China5.3%

India8.6%

Sri Lanka6.5%

Singapore21.4%

Thailand20.7%

Japan4.0%

Japan5.3%

Note: Including re-exports, exports totalled US$169.0 million and US$300.9 million, respectively, in 2009

and 2014.

Source: UNSD, Comtrade database.

1.7 Trends and Patterns in Foreign Direct Investment

1.22. From US$158 million in 2009, annual FDI inflows peaked at US$424 million in 2011 and remained relatively high in 2013 and 2014.33 FDI stock was estimated at US$2.5 billion in 2014, compared to US$128 million in 2000. Much of the investment was in the tourism sector. As at July 2015, FDI stock in other sectors (mainly transportation, logistics, water and sewerage) stood

33 UNCTAD (2015b).


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at US$977.7 million (Table 1.4). The authorities consider that prospects are promising with the implementation of the 2014 Special Economic Zones Act (Section 3.2.4.2).

Table 1.4 Stock of (non-tourism) foreign direct investment, July 2015

(US$'000) Type of investment Amount

Air transportation & inflight catering 24,058

Medical services 5,350

Accountancy 929

Repair/maintenance of machines 45,217

Water and sewerage 293,209

Telecommunications 30,814

Cement 1,444

Spa management services 2,784

Water sports centres 1,371

Boat building 4,535

Accommodation/property management systems 78

Computer software 232

Construction 12,846

Transportation/logistics 554,807

Total 977,673

Source: Information provided by the Maldivian authorities.


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2 TRADE AND INVESTMENT REGIME

2.1 Introduction

2.1. Since the previous Review in 2009, Maldives has been through a complex political transition period. Some changes were made in the legal and institutional framework for trade and investment, including new legislation or amendments on, inter alia, customs valuation, public health, taxation, copyright and related rights, tourism, land lease and financial services, as well as the establishment of a Trade Facilitation Committee to advise on issues relating to the facilitation of trade and the ease of doing business in the country.

2.2. The graduation of Maldives from least developed country (LDC) status in 2011 and/or its classification as an upper middle income country by the World Bank have had some implications for preferential market access to certain major markets (e.g. Canada, China and the EU), some WTO commitments/benefits (e.g. TRIPS), and possibly the level of Official Development Assistance and technical assistance. Its involvement in regional trade agreements remains limited and unchanged; it is a party only to the South Asian Free Trade Agreement (SAFTA) and is about to launch negotiations for a free trade agreement with China. Despite a seemingly transparent legislative process and being a longstanding beneficiary of Trade-related Technical Assistance (TRTA), Maldives' poor record of WTO notifications and relative observance of tariff binding commitments remains virtually unchanged.

2.3. The foreign investment regime remains liberal; 100% foreign ownership is permitted in all sectors except for longline fisheries (since 2010) and retail trade and, as of 2014, the positive list of activities was replaced by a case-by-case review of each application. In addition to the 2015 constitutional changes opening land ownership to foreign investors, new investment incentives in Special Economic Zones (SEZs) applicable to both domestic and foreign investors, an equitable business profit tax (BPT) (replacing the unfavourable royalty regime), and dispute settlement guarantees were recently introduced.

2.2 General Constitutional and Legal Framework

2.4. Maldives is in the seventh year of a complex political transition to a multi-party democracy that involved, inter alia, political turmoil.1 In July 2015, it amended its national constitution (ratified on 7 August 2008) to allow foreign ownership of land (Sections 2.7 and 4.5.2), thus allegedly enhancing regional competition for influence over one of the busiest oceans in the world.2

2.5. Under the 2008 Constitution, which separates the powers of the State between the legislative, judicial, and executive branches, the President is both chief of state and head of government. The Cabinet of Ministers is appointed by the President and endorsed by the Parliament. The Cabinet formulates government policy, annual budgets, and government bills, which must be submitted to the Parliament for approval. Furthermore, all bilateral and multilateral agreements need to be authorized and ratified by the President on the advice of the Cabinet. The President is elected by direct vote for a five-year term (eligible for a second term); the election held on 7 September 2013 was annulled by the Supreme Court; a rerun of the first round was held

1 Since the election of the first ever democratically elected President in 2008, Maldives was confronted

with a number of systemic political challenges, including an unexpected shift of power in early 2012 resulting from the resignation of the newly-elected President. Transparency Maldives (2014); World Bank (2014c); The Diplomat article "Trouble in Paradise: Democracy Retreats in the Maldives", 14 March 2015. Viewed at: http://thediplomat.com/2015/03/trouble-in-paradise-democracy-retreats-in-the-maldives/; and The Japan Times article "Putting Maldives back on the democratic path", 26 May 2015.

2 The amended article stipulates, inter alia, that "allowing foreigners to own land under Article 302 does not undermine the Maldivian state's sovereignty over its territory and does not amount to loss of territory". "No part of the territory of the Maldives shall be used for foreign military purposes without the approval of the majority of the total membership of the People's Majlis." The Wire article "Maldives Amends Constitution to Allow Sale of Islands to Foreign Nationals", 23 July 2015. Viewed at: http://thewire.in/2015/07/23/maldives-amends-constitution-to-allow-sale-of-islands-to-foreign-nationals-7035/; and The Guardian article "Maldives law 'selling' foreigners islands stokes Delhi's fears of rising Chinese role", 24 July 2015. Viewed at: http://www.theguardian.com/world/2015/jul/24/maldives-law-selling-foreigners-islands-stokes-delhis-fears-rising-chinese-role.


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on 9 November 2013 and a runoff was held on 16 November 2013.3 The next election is to be held in 2018.

2.6. Legislative power remains vested in the 85-seat (since December 2013) unicameral Parliament or People's Majlis, whose members are elected by direct vote to serve five-year terms. Last elections were held on 22 March 2014 and the next are due in 2019.4

2.7. The judicial system remains based on Islamic law, with some English common law, mainly in commercial matters. The Supreme Court, which consists of the chief justice and five judges (as of 2014), is the highest judicial authority; its members are appointed by the President in consultation with the Judicial Service Commission – a separate ten-member body of selected high government officials and the public – and upon confirmation by voting members of the People's Majlis.5 The Judicial Service Commission appoints all judges of subordinate courts, i.e. the High Court, the Criminal, Civil, Family, Juvenile, and Drug Courts, and the Magistrate Courts (on each of the inhabited islands).

2.3 Trade Policy Formulation, Implementation, and Evaluation

2.8. The Ministry of Economic Development (MED) remains responsible for, inter alia, the formulation of economic and trade policies in consultation and coordination with other Government stakeholders, the regulation of trade and investment (except for tourism), as well as the labour, maritime and land transport sectors.6 The Ministry of Foreign Affairs assists the MED in its foreign dealings, which are mainly carried out through the country's missions abroad. Other ministries actively involved in trade and related policy formulation and implementation include those of Finance and Treasury, Tourism, and Fisheries and Agriculture. In 2015, a Trade Facilitation Committee, chaired by the MED, was established under the MED to advise on issues relating to the facilitation of trade and the ease of doing business in the country. The Committee replaced the 2009 National Trade Policy Coordinating Committee. The Maldives Customs Service (MCS), which has been an autonomous body since 2011 (previously under the Ministry of Finance and Treasury), is responsible for administering the tariff regime, customs procedures, and rules of origin.

2.9. Advice on economic policy continues to be provided by the Maldives Monetary Authority (MMA), the Ministry of Finance and Treasury, and the MED. No independent body evaluates or advises the Government on trade and economic matters. An independent Auditor-General's Office (AGO) remains in place but, despite its high degree of autonomy and independence, its operations are apparently hampered by several difficulties.7 As from 2011, a Business Council chaired by the Minister of Economic Development has deliberated on issues faced by the business community in the trading environment of the country.8

3 Online information. Viewed at:

http://www.theodora.com/wfbcurrent/maldives/maldives_government.html. 4 Online information. Viewed at:

http://www.theodora.com/wfbcurrent/maldives/maldives_government.html. 5 Online information. Viewed at:

http://www.theodora.com/wfbcurrent/maldives/maldives_government.html. 6 Online Ministry of Economic Development information. Viewed at:

http://www.trade.gov.mv/page/about-us. 7 The AGO, an independent state organization responsible for auditing government organizations,

government companies, and other bodies entrusted with government revenues and assets, was created with the enactment of the Audit Act (No. 4/2007), and the first independent Auditor General was appointed in January 2008. Nevertheless, it seems that the effective implementation of its mandate is constrained by limitations of financial independence and human resources capacity. His work is hampered by cooperation and coordination difficulties with the institutions being audited, which often lack necessary information and practice poor book-keeping. Transparency Maldives (2014).

8 The following stakeholders are represented at the Council: Maldives Association of Construction Industries; Maldives Association of Tourism Industries; Maldives Association of Travel Agents and Tour Operators; Maldives Seafood Processors and Exporters Association; Live Aboard Association of Maldives; Maldives National Chamber of Commerce and Industry; Association of Lady Entrepreneurs; Restaurant Association of Maldives; and individual members. Online Ministry of Economic Development information. Viewed at: http://www.trade.gov.mv/page/business-council.


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2.4 Trade Policy Objectives

2.10. During the review period, Maldives' development agenda has been ambitious, working to cement newly established democratic institutions and taking a leading role in international efforts on climate change.9 The development of a comprehensive long-term national climate change adaptation strategy for Maldives could help mobilize grants and concessional loans.10

2.11. A 2013-2017 Manifesto contains several aspects of the Government's development strategy, comprising: youth as the foundation for development; health for all; empowering women for development; education for a developed society; revival and continuation of the Islamic identity; housing for a comfortable life; infrastructure for a better future; tourism; wealth from fisheries; profit from agriculture; national security and social protection; energy for all; reliable transport; clean, unpolluted environment; the economy; rule of the people; and the future of the Male City Area.11 Its priority actions for the year 2015 envisaged measures promoting youth as the foundation of development (the creation of 94,000 new jobs, the ban/restriction of foreigners in certain activities (e.g. sales, photography, diving, music bands), and loans), the empowerment of women (e.g. SME funding for female employment), reliable transport services, and the adoption of economic measures in a number of areas including taxation, trade facilitation, credit guarantee schemes for SMEs, IPRs, and efficient governance.

2.12. Maldives' trade policy objectives remain unchanged and a National Development Strategy (2015–18) was being formulated by the Ministry of Finance and Treasury by end-October 2015. As in the last Review, despite its land constraints, climatic risks, and continued involvement in the economy, the Government sees further trade and economic liberalization as important means of promoting private-sector investment and development, particularly in the tourism and fisheries sectors, thus reducing poverty and ensuring better living conditions.

2.13. As indicated in the previous Review, continued reform is required to create a level and competitive playing field between the State and private sectors, so as to foster private-sector development.12 The trade regime needs to be made more predictable, and investor confidence needs to be enhanced. Some efforts in this direction were made during the review period (Section 2.7).

2.5 Main Trade Laws and Transparency

2.5.1 Legislation

2.14. All legislative proposals must be presented to the Majlis as bills. They are debated by the relevant committee, which may introduce amendments or send it back unchanged to the Majlis to vote on. A simple majority, and the assent of the President, is required to pass a bill. All drafts of bills that have been presented to the Parliament, reports of parliamentary committees following the deliberation of bills, any amendments proposed to the bills, as well as the final draft of the bill passed by the Parliament are published on its website.13 Legislation enters into force upon its publication in the public gazette, which is available online (http://www.gazette.gov.mv/ and http://www.mvlaw.gov.mv/). Although translation of laws into English takes place only if the need arises, there seems to be a project for translating all laws and placing them online by the end of 2016. The Consolidated Laws of Maldives, a recent initiative by the Attorney General, containing all Maldives' statutes translated into English, and a platform with bi-lingual search capabilities, LexisMaldives, are expected to be completed by the end of 2016.14 Regulations enacted by ministries and departments have the effect of law; they provide guidance on particular areas not addressed in the legislation.

2.15. The President ratified the WTO Agreement in March 2004, whereby it became law (Section 2.6.1). The authorities indicated that the WTO Agreement is now fully implemented.

9 World Bank (2014c). 10 IMF (2015). 11 Unofficial English translation of the Manifesto of the Progressive Party of Maldives (PPM) 2013–2017. 12 WTO document WT/TPR/S/221/Rev.1, 5 November 2009. 13 Transparency Maldives (2014). 14 Ministry of Economic Development (2015b).


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2.16. During the review period, new legislation or amendments were passed on, inter alia, customs valuation, public health, the GST, the BPT, SEZs, copyright and related rights, tourism, financial services, and the airport service charge (Sections 3 and 4). Bills to be passed relate to electricity and telecommunications activities. The main law governing trade is the Export and Import Law 1979 (31/79), which stipulates the conditions and procedures for the export and import of goods (Table 2.1).

Table 2.1 Main trade-related legislation, 2015

Title of legislation Export and Import Law, 1979 (No. 31/79) Tourism Act, 1999 (No. 2/99) Law on Public Utilities: electricity distribution, telecommunication provision, water distribution, sewerage systems, 1996 (No. 4/96) Import and Sale of Pharmaceutical Drugs, 1975 (No. 75/78) Contract Law, 1991 (No. 4/91) Mortgage Law, 1993 (No. 9/93) Law on Leasing Uninhabited Islands for Developing Tourist Resorts, 1994 (No. 3/94) Law on Bills of Exchange, Cheques and Promissory Notes, 1995 (No. 16/95) Foreign Investment Law, 1979 (No. 25/79) Law on Outlets Selling Imports and Food Serving Outlets, 1978 (No. 60/78) Consumer Protection Law, 1996 (No. 1/96) Law on Prohibited Imports, 1975 (No. 4/75) Partnership Law, 1996 (No. 9/96) Companies Law, 1996 (No. 10/96) Environment Protection and Preservation Act, 1993 (No. 4/93) Cooperative Societies Act (No. 3/2007) Business Registration Law, 2014 (No. 18/2014) Sole Proprietorship Law, 2014 (No. 19/2014)

Source: Maldives' authorities.

2.17. No comprehensive regulatory reform or plans exist in this area. No estimate of the cost of regulatory barriers to the Maldivian economy and benefits of removing them has been done. However, in 2013, preliminary recommendations in specific investment climate areas in a reform memorandum prepared by the World Bank Group members noted that its Doing Business indicators (Section 2.7) pointed to areas where the private sector could benefit from simplification of the regulatory burden or stronger legal protections. Their recommendations focused, inter alia, on strengthening the regulatory and institutional framework in Maldives.15

2.5.2 Transparency

2.18. Lack of transparency, and thus lack of public accountability, creates scope for administrative discretion and therefore corruption. Maldives' development strategy put significant emphasis on improvements in governance and public administration. The Prevention and Prohibition of Corruption Act of 2000 provides for the criminalization of corruption offenses. Maldives acceded to the United Nations Convention against Corruption (UNCAC) on 22 March 2007.16 According to the authorities, the accession to the UNCAC has the same effect as ratification. A review of the implementation of Chapters 3 (Criminalization) and 4 (International Cooperation) of the UNCAC in Maldives was done in 2015, and the process of finalizing the relevant report was ongoing at end-October 2015. The Anti-Corruption Commission (ACC), which was established in October 2008 to, inter alia, investigate corruption offenses, has expressed serious concerns about the high levels of systemic corruption.17 Between 2011 and 2014, the number of cases investigated by the ACC increased from 409 to 783. As part of its Strategic Plan (2015-2019) the ACC drafted a National Integrity Plan (NIP), a preventive mechanism to counter corruption by raising integrity,

15 International Finance Corporation/Multilateral Investment Guarantee Agency/World Bank (2013). 16 Online information. Viewed at: http://www.unodc.org/unodc/treaties/CAC/signatories.html. 17 According to the Global Corruption Perception Index (CPI) 2011, published by Transparency

International, Maldives was ranked amongst the most corrupt countries in the Asia Pacific region, i.e. 134th out of 182 countries (143rd out of 178 countries in 2010); since then, the country has not figured in the CPI in 2012 or 2013, due to an alleged lack of data. Transparency Maldives (2014).


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transparency and accountability, which was to be launched on 9 December 2015, International Anti-Corruption Day. Action was also taken to address corruption in government procurement practices (Section 3.4.5).

2.19. Despite being a longstanding beneficiary of TRTA (Section 2.6.1) from the WTO and other organizations, the state of play of Maldives' WTO notifications and observance of tariff bindings commitments has remained virtually unchanged since the last Review (Sections 3.2.4.3, 4.2.2.4 and 4.3.4). Whereas in the course of the previous review period (2003-09) no notifications were submitted to the WTO, a single submission notification relating to the Law on Copyright and Related Rights (Law No. 23/2010) was made since 2009.18 Furthermore, apart from some tariff-related Integrated Data Base submissions (last made in 2011), no notification has ever been submitted in areas such as customs valuation, state trading, technical barriers to trade (TBT), sanitary and phytosanitary (SPS) measures, where Maldives maintain relevant measures.19 According to the authorities, the main reasons for non-submission of WTO notifications are the lack of both human resources capacity and knowledge in notification matters as well as the outcome of institutional restructuring (Section 2.3) that deprived agencies of staff already trained in this area.

2.6 Trade Agreements and Arrangements

2.20. Maldives graduated from the LDC category on 1 January 2011.20 As indicated at its previous Review, the loss of this status implies an eventual phasing out of LDC-specific international support, such as preferential market access, priority in Official Development Assistance (ODA) allocation and special eligibility for technical and financial assistance, as well as modification of certain LDC-specific WTO commitments or benefits (Sections 2.6.1, 2.6.2, 2.6.3, and 2.6.4).21 According to the relevant United Nations committee, although the international community adopted provisions to phase out some LDC-specific support measures in an orderly manner, overall, during the first 11 months of graduation no visible sign of reversal in country's development progress due to an abrupt withdrawal of support had been detected.

2.6.1 Multilateral agreements

2.21. Maldives, an original Member of the WTO and a former GATT contracting party, accords MFN treatment to all WTO Members and is eligible for "special and differential treatment" under WTO rules. Its trade policies have already been reviewed twice; the last Review took place on 26 and 28 October 2009. Maldives has neither accepted the WTO Trade Facilitation Agreement (TFA) nor requested technical assistance in the compliance-related area of the Agreement yet; as of end-October 2015, the preparation of the notification of TFA provisions to be implemented immediately upon its entry-into-force and the work for launching the process of its ratification were underway.22 Maldives has never been a party to any disputes under the WTO Dispute Settlement Mechanism.

2.22. As from the date of its graduation, Maldives has no longer been eligible for LDC treatment in areas such as the transition period for implementing the TRIPS Agreement, and the preferential tariff treatment available to goods and services originating in LDCs.23 Maldives notified its new TRIPS implementing legislation to the TRIPS Council in 2012. The review of this legislation was

18 This notification under Article 63.2 of the WTO TRIPS Agreement covered the Law on Copyright and Related Rights (Law No. 23/2010). WTO documents IP/N/1/MDV/1, 17 October 2011; and IP/N/1/MDV/C/1, 19 October 2011.

19 WTO document G/MA/IDB/2/Rev.41, 20 May 2015. 20 Following the devastation caused by the Indian Ocean tsunami of 26 December 2004, graduation

became effective after a longer than expected transition period, i.e. seven years after having been recommended. United Nations document CDP2012/PLEN/12, Note by the CDP Secretariat on Maldives for the Committee for Development Policy Expert Group Meeting, Review of the list of Least Developed Countries, 16-17 January 2012. Viewed at: http://www.un.org/en/development/desa/policy/cdp/ldc_documents/maldives_monitoring_report_2012.pdf.

21 WTO document WT/TPR/S/221/Rev.1, 5 November 2009. 22 The Special and Differential Treatment provisions of the Agreement allow each developing country to

determine when they will implement each of the individual provisions as well as those provisions for which they will need technical assistance and support for capacity building in order to implement. Online information. Viewed at: https://www.wto.org/english/tratop_e/tradfa_e/tradfa_agreeacc_e.htm.

23 WTO online information. Viewed at: https://www.wto.org/english/tratop_e/devel_e/dev_special_differential_provisions_e.htm, and document WT/TPR/S/221/Rev.1, 5 November 2009.


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initiated at the TRIPS Council's meeting in June 2012, and was completed in March 2013 (Section 3.4.9).24 As of end-October 2015, the MED was translating the Trade Mark and the Geographical Indicators bills into the local language prior to their submission to Parliament.

2.23. During the review period, the WTO Secretariat remained the largest provider of TRTA and capacity-building activities to Maldives.25 In 2010 and 2011, Maldives submitted four requests for technical assistance and capacity-building in the areas of trade and development, customs valuation and trade facilitation, SPS and TBT, and trade in services. As a result, two national activities on customs valuation (2011) and SPS and TBT (2012) involving 44 participants were organized in the country. Between 2009 and 2015, Maldives was invited to 261 TRTA activities abroad (global, regional and national) and online (e-learning); 113 officials/stakeholders participated in 54 of them, in areas such as market access, Aid for Trade, trade facilitation, government procurement, intellectual property rights, trade and environment, public health, SPS, agriculture, trade in services, and Doha Development Agenda issues. In 2012, Maldives participated in two Islamic Development Bank conferences covering, inter alia, dispute settlement and non-agricultural market access negotiations issues. As of September 2015, Maldives had not requested the organization of any new national TRTA, and it was to be invited to ten technical assistance activities covering, inter alia, dispute settlement, agriculture, and SPS transparency matters. Following the Enhanced Integrated Framework (EIF) Board Decision in July 2010, Maldives was granted an automatic extension of full EIF benefits after graduation from LDC status until December 2015.26

2.6.2 Regional agreements

2.24. Maldives remains a member of the South Asian Free Trade Area (SAFTA), which entered into force in January 2006, and was notified to the WTO under the Enabling Clause in April 2008.27 Under SAFTA, India, Pakistan and Sri Lanka were required to reduce their customs tariffs to 20% by January 2008, while the LDC members (Bangladesh, Bhutan, Maldives and Nepal) were required to reduce theirs to 30% (Section 3.2.4.5). Furthermore, India, Pakistan and Sri Lanka were required to reduce their tariffs on imports from LDC members to 0-5% by January 2009, while LDC members were required to do the same by January 2016.28 SAFTA provides a compensation mechanism for LDC members' revenue losses resulting from the lowering of tariffs, as well as technical assistance to them. The authorities indicated that Maldives has not yet been a beneficiary of this mechanism.

2.6.3 Bilateral agreements

2.25. Maldives' only operational bilateral trade agreement continues to be with India. The agreement does not provide any tariff preferences in either direction. However, it does allow Maldives to import certain products from India, the export of which is otherwise not permitted; these products include river sand, eggs, potatoes and onions. On 8 September 2015, a Memorandum of Understanding on Launching the Negotiation of the China-Maldives FTA (free trade agreement) was signed; the authorities indicated that a first meeting was scheduled for November 2015.29 At the time of the previous Review, Maldives was negotiating FTAs with

24 WTO documents IP/C/M/70, IP/C/M/71, 12 February 2013; IP/C/M/72, 13 May 2013; and IP/Q/MDV/1, 13 February 2013.

25 WTO online TRTA database. Viewed at: http://wtotrta/Public/ContryProfile.aspx?CountryId=74. 26 Maldives' Tier 1 support to the National Implementation Arrangements ("NIAs") project has been

under implementation since January 2011. It has benefited from a two-year extension until 2017 and its funding has been secured. The first Tier 2 project on trade facilitation, which relates to the implementation of ASYCUDA+ and the aviation sector, was approved by the EIF Board on 30 May 2013. Operationalization of the project is underway with the signing of the MOU with the United Nations Office for Project Services (UNOPS) on 5 August 2013. Online information, viewed at: http://www.enhancedif.org/en/country-profile/maldives.

27 SAFTA covers trade in goods only. Its member states are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. More information on SAFTA is available online at: http://saarc-sec.org/areaofcooperation/detail.php?activity_id=5 and http://rtais.wto.org/UI/PublicShowRTAIDCard.aspx?rtaid=188.

28 The SAFTA Agreement stipulates that "notwithstanding the potential or actual graduation of Maldives from the status of a Least Developed Country, it shall be accorded in this Agreement and in any subsequent contractual undertakings thereof treatment no less favourable than that provided for the Least Developed Contracting States".

29 Online Ministry of Commerce of China FTA Network press release Chinese Vice Minister of Commerce Gao Yan Visits Maldives and Attends the 2nd Meeting of China-Maldives Joint Committee of Economy and


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Sri Lanka and Qatar but no update was available with the authorities in the context of the current TPR.

2.6.4 Generalized System of Preferences (GSP) and other unilateral preferences

2.26. Maldives continued to receive preferential tariff treatment as a developing country under the GSP schemes of Australia, Belarus, Iceland, Japan, Kazakhstan, New Zealand, Norway (LDC treatment), Russian Federation, Switzerland, Turkey, and the United States (as from 1 January 2010).30 As from 1 January 2015, it has been excluded from the schemes of Canada and the European Union, a market of great importance mainly for canned tuna exports (Section 1.6).31 Similarly, as from 1 January 2014, no zero tariff treatment has been available to Maldives' exports to China. Prior to its graduation, Maldives' exports benefited from duty-free access to the EU market under the "Everything but Arms" (EBA). Maldives was given a three-year transition period until the end of 2013 to benefit from the advantages of the EBA agreement and, as of 2014, it was shifted to the general GSP preferences. It seems that its application for the EU's preferential treatment under the GSP Plus agreement was not taken into consideration.32

2.7 Foreign Investment Regime

2.27. Maldives continues to operate a liberal foreign investment regime, as reflected by its top ranking in the region's FDI inflows as a share of GDP (5%) and its diverse spectrum of contributors. However, during the review period, its position in terms of ease of doing business dropped significantly, seemingly due to the introduction of the BPT and the GST in 2011 (Section 3.4.2).33 The Government acknowledges the importance and contribution of foreign investment to economic development and job creation, and permits foreign investment in virtually all sectors of the economy (see below). It intends to pursue an ambitious reform agenda in several areas, including business and property registration, access to credit (e.g. secured transactions), the protection of minority shareholders, trade logistics, the resolution of commercial disputes, and the insolvency regime.34 The authorities are keen to develop new labour-intensive sectors, such as off-port shipping services, information technology, and financial services, in order to reduce dependence on tourism (Section 1.1). A more favourable business climate has the potential to boost competitiveness and improve firms' growth and productivity.

2.28. Achieving the Government's goal of diversifying the economy requires continued improvements to the investment climate.35 During the review period, action was taken to address criticism over and weaknesses of the FDI regime by creating an increasingly favourable investment environment.36 Although no changes were brought to the main legislation governing foreign direct investment, the maximum period for leasing an island was extended up to 99 years as of April 2015, and the Constitution was amended in July 2015 to allow foreign nationals and entities

Trade, 15 September 2015. Viewed at: http://fta.mofcom.gov.cn/enarticle/chinamedfen/chinamedfennews/201509/28480_1.html.

30 Between September 1995 and 2009, Maldives was suspended from eligibility for trade benefits under the United States GSP programme. UNCTAD (2015a); and United States International Trade Commission online information. Viewed at: http://www.usitc.gov/research_and_analysis/tradeshifts/2012/usimport.htm.

31 Maldives was classified by the World Bank as an upper-middle income country in 2011, 2012 and 2013. European Commission Delegated Regulation (European Union) No. 1421/2013 of 30 October 2013 amending Annexes I, II and IV to Regulation (European Union) No. 978/2012 of the European Parliament and of the Council, applying a scheme of generalized tariff preferences; Canada Gazette, Part II, Vol. 147, No. 21 (2013).

32 The GSP Plus agreement is an extended preference scheme which focuses on the full removal of tariffs on same product categories covered by the general GSP agreement. These are granted to countries which ratify and implement international conventions including human and labour rights, environment and good governance. Maldives Monetary Authority (2015a).

33 In 2015, the World Bank ranked Maldives 116th (out of 189 economies) or 3rd (out of 8 South Asian economies) for overall ease of doing business, a significant drop compared to 69th (out of 181 countries) in 2009. Online information. Viewed at: http://www.doingbusiness.org/rankings; The International Bank for Reconstruction and Development/The World Bank (2008); and World Bank (2014b).

34 World Bank (2014b). 35 International Finance Corporation/Multilateral Investment Guarantee Agency/World Bank (2013). 36 In 2013, this criticism referred to inconsistent government policies surrounding the investment

environment, the lack of comprehensive guidelines or regulations for foreign investors, the lack of clarity in Maldivian business laws, the slowness of the judicial system, and the work permit (annual) renewal system. Ministry of Tourism Arts and Culture (2013); and Ministry of Economic Development (2015b).


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the right to own freehold land, including entire islands (Sections 2.2 and 4.5.2).37 Foreign investment continues to be governed by the Law on Foreign Investments in the Republic of Maldives (25/79).38 The Law provides for an agreement between the Government and the foreign investor and stipulates the terms and conditions and implementation of the agreement. It also provides for, inter alia: an investment guarantee, dispute settlement and arbitration procedures, 100% foreign ownership, and unrestricted repatriation of profits. In general, the business-related laws apply equally to both local and foreign investment businesses registered in Maldives.

2.29. During the review period, the positive list of activities was eliminated and the Business Registration Act 2014 allows foreigners to engage in professional services (law, healthcare, accounting, taxation, and financial services) as well as wholesale trade, in addition to tourism.39 Foreign investors in activities other than professional services are required to participate in a business with a capital exceeding US$1 million and make a security deposit of US$100,000 to an agency determined by the Government. No foreign investment is allowed in small business or any kind of retail trade; the same applies to long line fisheries since 2010 (Section 4.2.1.3.1).

2.30. Several changes were made to the investment approval and registration procedures. Under the Business Registration Act (No. 18/2014), as from 2014 all foreign investments have been registered by MED's Business Registration Section.40 Prior to registration, all foreign investment applications and related documentation (e.g. authorizations from agencies in charge of the investment activity) must be submitted to the MED's Business Registration Section and then forwarded to a review committee for approval.41 The standard processing time is 3 working days; however, a maximum of 10-14 days may be required for cases where further clarification is needed. All applications approved by the review committee, except for those in tourism that are dealt with by the relevant agency due to its sectoral specificity, receive a foreign investment approval letter and a draft foreign investment agreement (FIA) requiring the submission of the necessary documents for registration in Maldives.42 All applicants, except those who engage in the tourism sector, are required to pay an administrative fee of US$2,000 to the Maldives Inland Revenue Authority prior to signing their FIA. The application for registering a company or partnership is processed within two days. Once the registration certificate is issued and the FIA is entered into force, the company may commence business in accordance with the applicable laws and regulations. No data on the approval or rejection of foreign investment applications were available with the authorities.

2.31. All incentives apply equally to foreign and domestic investments and depend on the scale of the investment. For example, investments in excess of US$2 million are allowed duty-free imports of machinery, capital goods, and construction materials for two or three years (new investment), while for expansion of existing investment, the duties may be waived for a maximum of three years (investment value from US$2 million to US$25 million), five years (investment value from US$25 million to US$50 million) and seven years (investment value from US$50 million to US$75 million) (Section 3.2.4.4). Under the Special Economic Zones Act No. 24/2014, new tax incentives were introduced to encourage investment in several activities (Section 3.4.2.3). Investors are also permitted to employ foreigners where suitably skilled Maldivians are not available.

37 Now a foreign party that invests more than US$1 billion in a project can be granted freehold in the

area designated for the project provided that, upon completion, "at least 70% of the land [has] been reclaimed from the ocean and visible at medium tide". The Wire article "Maldives Amends Constitution to Allow Sale of Islands to Foreign Nationals", 23 July 2015. Viewed at: http://thewire.in/2015/07/23/maldives-amends-constitution-to-allow-sale-of-islands-to-foreign-nationals-7035/.

38 For details on the Law on Foreign Investments in the Republic of Maldives (No. 25/79), see WTO document WT/TPR/S/110, 13 December 2002.

39 Business Registration Act (No. 18/2014). Viewed at: http://nasheedanil.co/wp-content/uploads/2014/09/Business-Registration-Act-Translation.pdf.

40 Previously, tourism-related investment was registered and licensed by the Ministry of Tourism, while all other investment had to be registered and licensed by the Foreign Investment Services Bureau (FISB) of the MED. The positive list of investment projects was eliminated. The 2014 Act repealed the Act on Doing Business in Maldives by Foreign Nationals, 1979 (No. 4/79). WTO document WT/TPR/S/221/Rev.1, 5 November 2009.

41 More information on investment related procedures and matters is available at Ministry of Economic Development (2015a).

42 Under the Business Registration Act 2014, the investor is required to register either as a company or a partnership before carrying on business in Maldives. There is also an option for overseas entities to register as the overseas branch of a foreign incorporated company in Maldives. Ministry of Economic Development (2015b).


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2.32. As of 18 July 2011, the BPT, inter alia, replaced the foreign investment royalty regime that discriminated against foreign investors (Section 3.4.2). Furthermore, Article 15(b) of the legislation establishing the tax allows for total exemption for foreign investors for a certain period provided that the investment is in priority sectors promoted by the Government (e.g. public-private partnership (PPP) and renewable energy), covered by an FIA citing the exemption term, or in the context of SEZs (Section 3.4.2.3 and Table 3.4).43

2.33. As there was no personal or corporate income tax in Maldives (except for business tax on banks) until 2011 when the BPT and the withholding tax were introduced, the country did not negotiate bilateral tax treaties to relieve international double taxation of income (Section 3.4.2). To date, only one limited multilateral agreement between members of the SAARC for avoidance of double taxation and mutual assistance in tax matters has been signed on 13 November 2005 (last amended on 19 April 2010) by Maldives.44 As of end-October 2015, double taxation avoidance agreements (DTAAs) with Sri Lanka, Qatar, Curaçao and the United Arab Emirates were being negotiated. At the same time, a first round of negotiations for a DTAA covering international air transport with India was concluded, and a similar one with Bangladesh was under consideration. Maldives has no bilateral investment treaties. Under an Arbitration Act based on the UNCITRAL Model Law that came into force in June 2013, foreign arbitral awards are now directly enforceable in Maldives through application to the High Court.45 A regulation on the procedures for making such an application to the High Court was passed and published in the official gazette in December 2013.

43 Until 2011, all foreign investments registered in Maldives were required to pay an annual royalty to

the Government that was set at a much higher rate for joint ventures with a majority Maldivian share. WTO document WT/TPR/S/221/Rev.1, 5 November 2009.

44 Online Maldives Inland Revenue Authority information. Viewed at: https://www.mira.gov.mv/Tax_Treaties.aspx.

45 Maldives is not yet a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, although the matter of acceding to the convention was before the Parliament in 2013. Jones Lang LaSalle/Ashurst (2014).


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3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Introduction

3.1. Maldives' trade policy has been through substantial changes in certain areas since the last TPR in 2009. In addition to a unilateral tariff liberalization initiative, policy developments have taken place in areas such as customs legislation, taxation, economic zones, and intellectual property rights protection.

3.2. The tariff remains one of Maldives' main trade policy instruments but its predominance as a source for government revenue has declined substantially with the introduction of new taxes. As a consequence of a 2011 unilateral MFN tariff liberalization initiative eliminating tariffs on about 31.5% of tariff lines, the average applied MFN tariff rate dropped from 21.4% in 2008 to 13.9% in 2015. Agricultural products continue to face lower tariff rates (averaging 11.3%) than non-agricultural items (WTO definition) (14.3%). The peak ad valorem rate was doubled to 400% (plastic bags, and polythene film and sheets). The introduction of the HS2012 tariff nomenclature resulted in 7% fewer tariff lines. The tariff structure has become slightly more complex owing to the increase in the number of applied MFN rates which, in 2015, stood at 13 (zero, 5%, 10%, 15%, 20%, 25%, 35%, 50%, 100%, 150%, 200%, 400%, one specific duty) compared to 11 in 2009. For most activities, the tariff is characterized by some level of de-escalation between unprocessed and semi-processed products, and escalation to fully processed goods, which means that effective rates of tariff protection can be considerably higher than nominal rates. As of end-October 2015, the Maldives Customs Service maintained an online tariff containing only 6,422 "active" tariff lines for customs declaration purposes that could provide scope for administrative discretion. The fact that 94.9% of tariff lines are bound, imparts a degree of predictability to the tariff. However, the simple average of bound MFN rates could considerably exceed the average applied MFN rate (possibly by about 24 percentage points), providing the authorities with extensive scope for increasing applied tariffs within bindings. Furthermore, similar to the last TPR, applied MFN tariff rates appear to exceed bound rates on some 323 tariff lines, of which 271 were on manufactured products. As Maldives' tariff Schedule of Concessions is based on the HS2007, it is difficult to accurately compare its bindings' status with the currently applied HS2012 tariff schedule, thus making the transposition of binding commitments to HS2012 another pressing task.

3.3. During the review period, trade facilitation improvements included the introduction of a fast clearance channel for imports, and the launching of the internal process to ratify the WTO Agreement on Trade Facilitation. New customs legislation in 2011 allowed for the implementation of provisions of the WTO Agreement on Customs Valuation; the transaction value is now used in a large majority of cases as the valuation basis.

3.4. Import licensing continues to apply to all imports, and an ad valorem fee is collected for the issuance of licences. Import restrictions and prohibitions on various items for, inter alia, religious, health, safety, security, and environmental reasons have remained generally unchanged. There has been no major change in the area of standards and other technical requirements. Labelling requirements for pre-packaged food, food imports, tobacco products and breast-milk substitutes have been updated. No legislation on contingency measures is in place.

3.5. Export duties levied on fish products (royalties) were replaced by the BPT indirect tax as from 2012, while a 50% duty on the f.o.b. value of ambergris exports was retained for revenue purposes. No changes were made to export prohibitions, restrictions, or the licensing regime. As from 2014, incentives involving, inter alia, temporary BPT exemption have been provided for the establishment of SEZs, including for export processing, but no such Zone has yet been established.

3.6. Domestic support is provided mainly through tax and non-tax incentives (e.g. direct payments), some of which are available to sector-specific activities, e.g. the fisheries, agriculture and energy sectors. State involvement in the economy, including in trading activities (e.g. MIFCO, and the State Trading Organization (STO)), remains prevalent in numerous sectors (e.g. fishing, public utilities, finance, telecoms, transport, and tourism). Despite the absence of privatization action during the review period, the authorities promoted joint ventures between government-owned companies and private sector stakeholders and, in 2013, they passed legislation on the procedures for the privatization, corporatization, monitoring, evaluation and


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introduction of shares of state-owned properties to the stock exchange. No major changes were made in the government procurement framework, a non-signatory to the WTO Plurilateral Agreement on Government Procurement; in addition to the possibility of restricting bids to domestic suppliers, local firms may be granted up to a 7.5% margin of preference in the evaluation of bids.

3.7. The passing of a Copyright and Related Rights Act in 2010 has been a major development in the protection of intellectual property rights (IPRs), and the preparation of draft legislation on patents, industrial designs, trademarks and geographical indications is underway. Maldives remains a non-signatory to any of the treaties administered by the World Intellectual Property Organization, and protection enforcement is weak. Competition and bankruptcy and insolvency legislation remain at the drafting stage, although a sector-specific legislation is in place for telecommunications. Rice, flour and sugar have to be sold at an officially set price.

3.2 Measures Directly Affecting Imports

3.2.1 Registration, documentation, and customs clearance

3.8. Since 2009, there has been no major change in the requirements for importing goods into Maldives. The main documents required for customs clearance include: the import licence; the declaration form; the original commercial invoice; the packing list; and the bill of lading or airway bill. Other documents, such as a sanitary and phytosanitary certificate or a certificate of origin, may be required where applicable. Additional documents are required for food imports.1

3.9. It is not mandatory to use the services of a licensed customs broker for the clearance of commercial imports, although the majority of businesses have recourse to one. The profession is restricted to individuals trained by the Maldives Customs Service (MCS) and holding a licence. As of July 2015, there were 52 licensed customs brokers. Customs brokers pay a registration fee of Rf 500 and an annual licence fee of Rf 3,500.

3.10. The enforcement of border protection laws, including customs procedures, is under the responsibility of the MCS, which has nine regional offices located across the country. In 2013, nearly 90% of imports were cleared in the Male region (Male's commercial harbour, the Ibrahim Nasir International Airport, or the post office).

3.11. Maldives is to complete the internal process necessary to ratify the WTO Agreement on Trade Facilitation (Section 2.6.1). No specific time-frame was indicated by the authorities.

3.12. Since January 2000, Maldives has been using the ASYCUDA++ version of the Automated System for Customs Data for its customs administration. Migration to ASYCUDA World is expected to be completed by mid-2016.2 Registered traders may submit their declarations to the system through the Electronic Data Interchange (EDI) or the Direct Trade Input (DTI). Maldives is in the process of establishing a paperless trading environment and, as such, the requirement to submit paper copies has been abolished. As of end-October 2015, approximately 50% of declarations submitted that year were lodged online. According to estimates from the MCS, customs procedures (from the lodgement of the declaration to the release of the cargo) take on average two days for shipments arriving through the airport, and five days for shipments arriving through the commercial harbour.

3.13. As part of efforts to establish a paperless trading environment, the authorities are working towards the development of a Single Window for trade facilitation. The legal framework is expected to be in place by end-2015. Obtaining the needed funding to support other agencies in the automatization of their processes is indicated by the authorities as the main challenge.

1 Maldives Food and Drug Authority's (MFDA) announcement No. IUL 23-AP/01/2010/252 clarifies

documentation requirements for food imports. For meat, meat products, fish and fishery products, a certificate of origin and a health certificate (veterinary certificate or certificate of condition from the competent authority of the exporting country) are required. In the case of eggs, egg products, dairy products and packaged foods, the importer must provide a certificate of origin indicating the country and district of production of such products.

2 The migration to ASYCUDA World is being implemented as part of an EIF (Tier 2) project approved in May 2013.


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3.14. Maldives does not require a preshipment inspection.3 Physical examination is carried out on a risk-assessment basis. High-risk items include: products with a misclassification history; products subject to restrictions and controls; duty exempted goods; and products that are subject to high duty rates. A database on such products is maintained internally by the MCS. In general, perishable items are less likely to be inspected. Approximately 25% to 30% of consignments are physically inspected.

3.15. In 2013, the MCS introduced a fast clearance channel with a view to providing a more convenient and speedier service for eligible importers and exporters. The eligibility is based on the trader's compliance history and the nature of the consignment. Low value and low duty rate items are generally eligible. The channel includes: an express service for document processing (declarations are not checked in detail); a customs portal and information kiosks, allowing traders to check the status of their declaration and submit additional documentation online; and a pre-payment system, enabling traders to make online payments and request release order/selectivity immediately thereafter. According to the authorities, goods eligible for the fast clearance channel can be cleared in less than three hours. Other trade facilitating measures include a pre-arrival declaration processing service; an online manifest submission system; a simplified customs declaration process for individuals; and the possibility of deferred payment for perishable cargo (for eligible traders).

3.16. Despite these trade facilitation initiatives, delays in the processing and clearance of goods are still relatively high. According to World Bank 2015 Doing Business data4, in 2015 Maldives ranked 137th out of 189 economies in ease of trading across borders (126th out of 181 economies in 2009). Documentary compliance for imports takes an estimated average of 61 hours. The authorities are of the view that these indicators do not accurately reflect the situation. Time release studies by the MCS concluded an average of two to five days (although this does not cover port/airport delays).

3.17. Maldives is a member of the World Customs Organization. It is expected to accede to the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention) in June 2016. According to the authorities, about 70% of processes and procedures are in compliance with the revised Kyoto Convention.

3.2.2 Customs valuation

3.18. With the adoption of the Maldives Customs Act in 2011, valuation of goods is, in principle, determined in accordance with the principles and provisions of the WTO Agreement on Customs Valuation. Imports are valued at their c.i.f. price, or the cost and freight charges price if the goods are not insured. The main valuation method is the transaction value of goods, and is based on the price actually paid or to be paid by the buyer. In a large majority of cases (94% of declarations processed in 2014), the value declared by the importer is accepted as the transaction value. When the declared value is rejected, the authorities adjust the value using reference prices (which are based on historical information). The importer may accept the raised value, submit additional documentation, or request a re-assessment. The authorities indicated that, in most cases, the importer submits additional documentation.

3.19. Appeals against customs decisions can be brought, in the first instance, to the MCS valuation sub-committee (in the case of valuation-related complaints) or to the Appeal Committee (for any other type of appeal). If the trader is not satisfied with the decision of the appeal process, he can file a case at the judicial courts within six months of the appeal decision. In 2014 and 2015, 44 appeal cases were brought before the Appeal Committee, of which 27 were related to valuation.

3.20. Under-valuation (or non-declaration) is the most frequent violation. It affects high duty rate items such as cigarettes, and high value items such as mobile phones. The legislation provides for fines ranging from 25% for the first instance of offense, to 50% for the third instance and any subsequent occurrence (within two years from the time of the first offence). In addition, the MCS may seize the licence of the offending person. The authorities indicated that there are few cases of smuggling. However, the smuggling of narcotics is a serious problem.

3 WTO document G/PSI/N/1/Add.8, 28 September 1999. 4 World Bank (2015a); and World Bank (2009).


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3.21. Lack of proper documentation is another major challenged faced in the process of customs valuation. The authorities indicated that informal business practices are still prevalent and it is common that importers visit the exporting countries and pay in cash.

3.22. Maldives has neither submitted notifications on its legislation nor replied to the checklist of issues as required by the WTO Agreement on Customs Valuation.5

3.2.3 Rules of origin

3.23. Maldives does not maintain any non-preferential rules of origin.6 Preferential rules of origin apply to imports under the South Asian Preferential Trade Arrangement (Sections 2.6.2 and 3.2.4.5). The main requirement for goods to be eligible for SAPTA preferences is that it be wholly produced or obtained in the territory of a member.7 Goods not wholly produced or obtained are subject to domestic value addition criteria (at least 30% of the f.o.b. value) or a change in the tariff heading (HS 4-digit level). Product-specific rules involving a combination of these two criteria also apply to some 191 HS headings. An appropriate certificate of origin issued by the designated authority in the exporting country must accompany the goods.

3.2.4 Tariffs

3.24. Maldives' applied customs tariff is governed by the Export Import Act No. 31/79 and its subsequent amendments. The tariff is available in English online (http://www.customs.gov.mv/tariff/). However, only active tariff lines are reported online, which leaves room for administrative discretion and corruption. As of end-October 2015, some 2,238 "inactive" tariff lines are not provided online. Tariff lines are activated on a needs basis, when a transaction occurs. The stated reason is to reduce scope for misclassification and ease the declaration process for traders. For the same purpose, the online tariff may contain several keywords (descriptions) for the same tariff line. As a result, the online tariff has 10,467 lines (but only 6,422 unique 10-digit codes).

3.25. The tariff in the 2012 version of the HS nomenclature was implemented on the date of its entering into force, on 1 January 2012. The 2015 applied MFN tariff has 8,661 lines, 3.6% less than the 2008 tariff which was based on the HS2007 (Table 3.1).

3.26. The applied tariff schedule is subject to frequent reviews, mainly through amendments to the Export Import Act. Reviews occur either on an ad hoc basis or annually as part of the budget process. There are also annual reviews at the end of each year (checking for misclassifications and incorporating feedback from traders). Such frequent revisions are likely to negatively affect the predictability of the tariff regime. During the review period, substantial tariff liberalization took place in 2011, in anticipation of the imposition of new taxes (Section 3.4.2). There have been a few more revisions since then, mostly upwards, for revenue purposes.

Table 3.1 Tariff structure, 2008, 2013 and 2015

(%, unless otherwise indicated) MFN applied Final

boundb 2008 2013 2015a

Bound tariff lines (% of all tariff lines) 96.3 94.9 94.9 94.9

Simple average rate 21.4 10.9 13.9 37.7

WTO agricultural products 17.2 8.2 11.3 44.2 WTO non-agricultural products 22.0 11.4 14.3 36.6

Duty-free tariff lines (% of all tariff lines) 0.1 43.2 31.5 0.0

Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0

Non-ad valorem tariffs (% of all tariff lines) 0.0 0.1 0.1 0.0

Domestic tariff "peaks" (% of all tariff lines)c 1.5 4.9 4.3 2.7

5 WTO document G/VAL/232/Rev.2, 8 October 2014. 6 WTO document G/RO/N/22, 16 September 1998. 7 Rules of Determination of Origin of Goods under the Agreement on South Asian Free Trade Area

(SAFTA).


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MFN applied Final boundb 2008 2013 2015a

International tariff "peaks" (% of all tariff lines)d 64.0 32.2 32.6 94.9 Coefficient of variation 0.6 1.8 1.8 1.2

Nuisance applied rates (% of all tariff lines)e 0.0 0.0 0.0 0.0 Total number of tariff lines provided 8,987 8,344 8,661 8,217 Ad valorem rates 8,972 3,603 5,927 8,217 Duty-free rates 9 4,735 2,727 0 Specific 6 6 7 0

a As of end-October. b Based on the 2015 tariff schedule. Calculations are based on 8,041 bound tariff lines. c Domestic tariff peaks are defined as those exceeding three times the overall simple average applied

rate. d International tariff peaks are defined as those exceeding 15%. e Nuisance rates are those greater than zero, but less than or equal to 2%.

Note: 2008 tariff is based on HS07 nomenclature; 2013 and 2015 are based on HS12. For 2008 and 2013, calculations exclude specific rates. For 2015, calculations include ad valorem equivalents (AVEs) for six out of seven specific rates based on 2014 import data provided by the authorities.

Source: WTO Secretariat calculations, based on MCS online information; and data received from the authorities.

3.2.4.1 Applied MFN tariff

3.27. As a result of a unilateral tariff cut undertaken in the context of the 2010 tax reform (Section 3.4.2.1), the tariff has undergone a substantial change over the period under review.8 The simple average of the applied MFN tariff dropped from 21.4% in 2008 to 10.9% in 2013, but increased to 13.6% in 2015 as duty reduction was reversed on some items (Table 3.1). The tariff cut was across most of the product categories, although its extent is larger for agricultural products (74.1% of duty-free lines) than non-agricultural products (24.4% of duty-free lines) (Table A3.1). Most tariffs on agricultural products (WTO definition) are zero rated. All tariff lines related to dairy products and clothing are zero rated (Table A3.1). High averages apply to beverages, spirits and tobacco (52.1%) and cotton (15%). Product categories that are less impacted by liberalization include textiles, transport equipment and non-electric machinery, with 3%, 5.8% and 5.6%, respectively, of duty-free tariff lines.

3.28. The 2015 MFN tariff has 12 ad valorem rates and one specific duty rate applied to seven lines (compared to 10 ad valorem rates and one specific rate applied to six lines at the time of the previous TPR). These are: zero, 5%, 10%, 15%, 20%, 25%, 35%, 50%, 100%, 150%, 200% and 400%. The newly introduced band of 150% applies to tobacco products, cigars and smoking pipes (these products were mostly subject to the rate of 50% at the time of the previous TPR). Similarly, the highest rate (now 400% compared to 200% in 2008) applies to 12 tariff lines consisting of plastic bags, and polythene film and sheets.

3.29. Seven tariff lines related to various types of cigarette sticks remain subject to a specific duty of Rf 1.25 per stick, which tend to conceal relatively high tariff rates. In 2014, ad valorem equivalents (AVEs) ranged from 225.8% to 766.7%. These AVEs are the highest applied tariff rates in place. It should be noted that every method of calculating AVEs is subject to bias and that AVEs can vary widely depending on the import price of the product involved.

3.2.4.2 MFN tariff dispersion and escalation

3.30. The mode of the tariff distribution has shifted from the 25% rate in 2008 (applying to 47.1% of tariff lines) to the zero rate (applying to 31.5% of tariff lines) (Chart 3.1). As high duty rates were maintained on some products, the tariff structure displays a high level of dispersion. Between 2008 and 2015, the coefficient of variation of the tariff increased threefold to 1.8,

8 In October 2011, import duties were eliminated on some 43.2% of tariff lines (there were only

15 duty-free tariff lines in 2008). They were partially reversed in the 2015 Budget, which included provisions to raise import duties on several items such as staple foodstuffs; vehicles; tobacco products; and luxury cosmetics and perfume.


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possibly reflecting selective protection in some sectors. Furthermore, high level of dispersion, especially within product groups, is an indication that similar goods might be taxed at significantly different rates, creating grounds for misclassification.

Chart 3.1 Distribution of MFN applied tariff rates, 2008 and 2015

(Number of tariff lines)

(31.5)

(8.1) (10.4)

(17.4)

(20.1)

(47.1)

(6.0)

(0.1)

(4.2)

(11.6)

(20.1)

(12.4)

(6.5)(4.5)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Duty free 5% 10% 15% 20% 25% >30%

MFN 2008 MFN 2015 (as of October)

Note: Figures in parentheses denote the share of total lines.

Source: WTO Secretariat calculations, based on data provided by the authorities.

3.31. With the exception of the sectors of chemicals and fabricated metal products and machinery, the 2015 tariff structure is characterized by some level of de-escalation between unprocessed and semi-processed products, and escalation to fully processed goods (with the exception of textiles and leather) (Chart 3.2). The de-escalation is pronounced in the sectors of wood and furniture products; paper, printing and publishing; and non-metallic mineral products. Such a tariff structure implies negative protection for semi-processed goods and discourages downstream processing. In addition, the relatively high tariff on semi-processed goods may result in lower effective rates of protection for final goods.

Chart 3.2 Tariff escalation by 2-digit ISIC industry, 2015

n.a.

n.a.

0%

5%

10%

15%

20%

25%

30%

31 32 33 34 35 36 37 38 39 Totalmanuf.

Average applied ratein manufacturing

(14.5%)

First stage of processing

Semi-processed

Fully processed

31 Food , beverages and tobacco 32 Textiles and leather 33 Wood and furniture

37 Basic metals38 Fabricated metal products and machinery39 Other manufacturing

34 Paper, printing and publishing35 Chemicals36 Non-metallic mineral products

n.a. Not applicable.



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3.2.4.3 Tariff bindings

3.32. Maldives bound its tariff mainly at a rate of 30%.9 However, some 3% of the tariff lines are bound at a rate of 300% (essentially meat products, alcoholic beverages, tobacco products, plastic bags, passenger motor vehicles, buses, motorcycles and their components). Based on the 2015 tariff schedule, 94.9% of lines were bound, leaving about 442 lines unbound. The unbound lines relate to fisheries (fish, crustaceans, and seaweed) and motor vehicle parts.

3.33. It is not possible to accurately compare bound tariff rates with applied tariff rates as the respective tariff schedules are in different nomenclatures: applied tariffs are in HS12 while bound tariffs are still in HS07 (see below). Many of the bound rates are higher than applied duties (Chart 3.3). Based on simple averages, the gap between the 2015 applied MFN tariff and the final bound tariff appears to be 24.1 percentage points, leaving considerable scope for the authorities to raise applied rates within the ceiling bindings. The state of observance of tariff binding commitments has not improved compared to the time of the last TPR. Applied rates appear to exceed bound rates on 323 lines (Table A3.2), compared to 218 lines at the time of the previous TPR. In addition, seven tariff lines bound at ad valorem rates are subject to specific rates. For two tariff lines, the ad valorem equivalent appears to exceed the bound rate. The authorities indicated that necessary adjustments will be made to comply with their commitments.

Chart 3.3 Average applied MFN and bound tariff rates, by HS section, 2008 and 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

01 Live animals & products 02 Vegetable products03 Fats & oils 04 Prepared food, etc.05 Mineral products06 Chemicals & products

07 Plastic & rubber08 Hides & skins09 Wood & articles10 Pulp, paper, etc.11 Textiles & articles12 Footwear, headgear

13 Articles of stones14 Precious stones, etc.15 Base metals and products16 Machinery17 Transport equipment18 Precision instruments

19 Arms & ammunition20 Miscellaneous manuf.21 Works of art, etc.

MFN 2008 MFN 2015 (as of October) Bound

Average applied rate2008 (21.4%)2015 (13.6%)

Average bound rate(37.7%)

(161.4%) (300%)>

Note: HS sections 01, 03, 04, and 17 are not fully bound.


3.34. Maldives bound its other duties and charges on most agricultural products at the rate of 1%. For most of the tariff lines, the column related to "other duties and charges" was left blank, which is equivalent to binding these charges at the rate of zero. In practice, there is a licensing fee (revenue stamp) equivalent to 0.1% of the c.i.f. value of imports (Section 3.2.5).

3.35. The transposition of Maldives' schedule of commitments into HS07 has been certified effective as of 12 August 2015.10 Work on the transposition into HS12 is scheduled to begin in 2016.11

9 WTO, Schedule CXVI – Maldives. Available at:

https://www.wto.org/english/tratop_e/schedules_e/mdv.zip. 10 WTO document WT/LET/1073, 9 September 2015.


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3.2.4.4 Tariff exemptions and concessions

3.36. During the review period, some changes were made to the legislation in this area. The main legislation governing tariff concessions are: the Export Import Act and its subsequent amendments; the State Right to Grant Exemption in respect of Certain Duties and Taxes Act; and the 2014 Special Economic Zones Act (Section 3.4.2.3).

3.37. Under Clause 8 of the Export Import Act, the President may grant duty exemptions for items imported for economic development purposes. These include: expensive machinery; capital equipment; construction material; aircraft and their spares; aircraft engines and their spares; and aircraft consumable technical supplies. Duties on such items are fully exempted. The duration of exemption depends on the nature and size of the investment. For new projects, duties are waived until the investment is established, and for up to a maximum of three years. For investments related to the expansion of an existing project, the maximum duration depends on the size of the investment as follows: 3 years for investments valued between US$2 million and US$25 million; 5 years for investments worth up to US$50 million; 7 years for investments of up to US$75 million; 10 years for investments of up to US$100 million; and 15 years for investments worth US$100 million and more. There are also sector-specific provisions. The President may also waive duties on goods imported under special circumstances such as an epidemic, a natural disaster, gifts, or free aid.

3.38. In general, items for personal use are exempted from customs duties, provided that they are worth Rf 6,000 or less. Duty is charged on the amount in excess of the threshold of Rf 6,000. Other duty-free items include: bio-degradable plastic bags; pipes and green house units; and products using renewable energy, and those that are used to generate renewable energy. Items imported for the expansion of the poultry, fisheries and agriculture industries are also duty free.

3.39. Goods imported on a temporary basis may be eligible for duty concession (Article 125 of the Customs General Regulations). The duty concession rate varies from a full exemption (for goods re-exported within 90 days from their date of importation) to none if the goods were to be re-exported after two years from the date of importation.

3.40. Import duty exemptions and concessions still represent a sizeable loss of revenue for the Government. During the review period, revenue forgone through duty exemptions soared to Rf 1,084 billion in 2011 (equivalent to 41.9% of collected import duties), reflecting exemptions granted for public infrastructure projects (Table 3.2). In 2014, duty exemptions amounted to Rf 550.5 million. This represented about 32% of duty collections in 2014, up from 17.9% in 2009. The proportion of duty exemptions accrued to the Government was 13.6% in 2014, down from 20.5% in 2009 (and from a peak of 38.7% in 2011). Nearly half of the duty concessions (41.4% in 2009) accrued to the private sector (excluding tourism). Government imports through SOEs, offices, and public projects accounted for about 13.6% of the value of duty concessions, and the tourism industry for about 10.3%.

Table 3.2 Duty exemptions, 2009-14

2009 2010 2011 2012 2013 2014 Total - in Rf million 331.0 361.7 1,084.0 404.2 387.5 550.5 - in % of import duties 17.9 17.6 41.9 29.5 24.5 32.0 By sector/recipient (% of total) Government 20.5 29.2 38.1 14.9 15.4 13.6 Private sector (excl. tourism) 41.4 46.8 38.7 61.7 59.1 48.3 Tourism 10.2 1.3 1.5 3 5.2 10.3 Individuals 27.9 22.7 21.7 20.3 20.2 27.8

Source: MCS.

11 In accordance with procedures adopted by the General Council (WTO document WT/L/831,

5 December 2011), the transposition of developing countries' schedules of commitments into HS12 is to be undertaken by the Secretariat, except for those who have submitted a notification by 31 December 2011 indicating their intent to prepare their own transposition. Maldives has not submitted such a notification and therefore the transposition of its schedule of commitments into HS12 is to be prepared by the Secretariat.


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3.2.4.5 Tariff preferences

3.41. As a member of the South Asia Free Trade Area (SAFTA), Maldives grants preferential tariff treatment to products originating in other SAFTA members countries12, with the exception of products on its sensitive list. Maldives' sensitive list comprises 154 products consisting mainly of items such as: fish and crustaceans, fruit, meat, alcohol, cigarettes and tobacco, plastic products and polythene, machinery and equipment, vehicles and vessels. The average applied tariff under the SAFTA was 5.3% in 2015, compared to 13.9% for the MFN tariff (Table A3.2).

3.42. Under SAFTA's liberalization programme and owing to its LDC status, Maldives is expected to reduce customs duties on all products except those on its sensitive list to rates between 0% to 5% by 2016 (Section 2.6.2).

3.2.5 Import prohibitions, restrictions, and licensing

3.43. Import restrictions and prohibitions are maintained for religious, health, safety, security, and environmental reasons. Maldives prohibits imports of religious materials offensive to Islam, idols for worship, pornographic material, live pigs, narcotics and psychotropic substances. Firearms, explosives, weapons and ammunition can only be imported by the Ministry of Defence and National Security. Goods subject to import permits or special permission are indicated in Table 3.3.

Table 3.3 Goods subject to import permits, July 2015

Goods Type of permit / Issuing person or authority or requirement Liquor and alcoholic products Prior permit / MED Pork and its by-products Prior permit / MED Chemical and chemical products Prior permit / Ministry of Defence and National Security Fireworks, fishing guns, fog signals and distress signals

Prior permit / Ministry of Defence and National Security

Dogs and dangerous animals Prior permit / Ministry of Defence and National Security Pets Health certificate / An authorized veterinarian

A rabies vaccination certificate is required for cats Live plants and animals Prior permit / Maldives Food and Drug Authority (MFDA)

Phytosanitary or sanitary certificate/ Foreign authority The vaccination for Fowl Pox and Newcastle Disease is required for chicken and chicks

Communication equipment Inspection and approval by the Communication Authority of Maldives Hydrochlorofluorocarbon gas and equipment containing HCHC gas,

Prior permit / Environment Protection Agency

biodegradable plastic products Certification / Environment Protection Agency Live fish, raw and frozen meat Health certificate / Foreign authority Birds Veterinary certificate/ Plant and animal quarantine unit Pesticides and fertilizers Prior permit / Ministry of Fisheries and Agriculture and Ministry of

Defence and National Security Medical products Product-specific permit / MFDA Breast-milk substitutes Product-specific permit / MFDA Vehicles that have been registered prior to import

Prior permit / Ministry of Transport Original re-registration certificate / Foreign authority

Source: Information provided by the authorities.

3.44. Imports of medical products are restricted to approved products from registered importers. In addition to the import licence from the MED, importers must be registered with the MFDA. They can only import products on an approved drugs list maintained by the MFDA. Any registered importer may request the addition of a new product to the list. Provisions related to parallel importing of pharmaceutical products seem to be in place.

12 These are: Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka.


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3.45. In accordance with commitments under the Montreal Protocol, hydrochlorofluorocarbons (HCFC) imports are subject to a quota.13 A draft legislation related to the import restriction for items containing HCFC has been sent to Parliament.

3.46. There has been no change to Maldives' import licensing regime, which continues to apply to all imports, including those of items for personal use.14 Businesses and individuals are required to obtain an import licence in order to engage in the import (or export) of goods.15 Licences are generally issued by the MCS, on behalf of the MED. An import licence entitles the holder to import goods up to a specified value within a year. Licences are valid for one year from the date of issuance. In accordance with the Revenue Stamp Act, a fee equivalent to 0.1% of the projected transaction (c.i.f. value of imports or f.o.b. value of exports) is collected for the issuance of the licence. The authorities justify the ad valorem nature of the fee on the grounds of revenue generation. The unused portion of the quota is forfeited upon expiration.

3.47. There are two types of licences: general and temporary. General licences are issued to individuals and companies holding a valid business permit to sell the imported items. However, any registered business can apply for a licence to import materials required for its operation. Occasional importers may apply for a temporary licence.

3.48. Maldives has not submitted a reply to the questionnaire on import licensing procedures to the WTO Committee on Import Licensing.

3.2.6 Anti-dumping, countervailing, and safeguard measures

3.49. Maldives has no legislative framework for anti-dumping, countervailing or safeguard measures, and has not taken any such measures. The Export Import Act contains provisions allowing the MED to take anti-dumping measures against imports from any country on an ad hoc basis. No anti-dumping action has been taken over the past six years.

3.2.7 State trading

3.50. The STO remains the main state-trading entity involved in the importation of goods (e.g. food, manufactures, hydrocarbons) and trade in services (e.g. insurance and tourism) (Sections 4.2.2.4, 4.3.2, 4.4.3, 4.5.2 and 4.5.3.1.2). Its main function is to ensure sufficient domestic supplies of staple food products, such as rice, flour and sugar, at prices determined by the Government, which then subsidizes the difference between such price and the cost of imports (Sections 3.4.8 and 4.2.2.4). Although there is no restriction on private parties engaging in the import of these products, they are not eligible for government subsidies and tend to engage only in the importation of premium range segments of these products. In 2014, the STO's imports of these items amounted to Rf 30.6 million, representing 19% of its total imports. The STO competes with the private sector in the importation of a wide range of other products and the provision of services; wholesale and retail trade represent the largest part of its turnover. It remains committed to being a profitable entity. No further information was available on the STO's exclusive import or distribution rights, its procurement methods, pricing, or traded values/volumes since 2009.

3.51. Maldives has never notified to the WTO any state-trading activity within the meaning of Article XVII:4(a) of the GATT 1994, due apparently to the capacity limitations of the authorities (Section 2.5.2).

13 The Government of Maldives has committed to a complete phasing-out of HCFC imports by 2020. A

system of licensing and quotas was put in place in 2010. From the baseline level of 67MT in 2011, the quota is set at 43.6MT (35% reduction) in 2016 and 21.8MT (67.5% reduction) in 2018. In January 2011, licences were issued to three importers.

14 Export Import Act, Act No. 31/79 and subsequent amendments. 15 Export Import Act No. 31/79.


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3.3 Measures Directly Affecting Exports

3.3.1 Registration and documentation

3.52. Exporters remain subject to the same registration requirements as importers, including the licensing requirement (Section 3.2.5). The documentation requirements for commercial exports typically include: the declaration form; the commercial invoice; the packing list; and any applicable permit, letter or document. In particular, shipments of fish products must be accompanied by a health certificate and a fitness certificate issued by the MFDA, and a catch certificate issued by the Ministry of Fisheries and Agriculture. For live fish, a pro-forma aquarium fish export licence (issued by the Marine Research Centre) is required. The MFDA charges a fee of Rf 200 per shipment of consignment.

3.53. The export declaration and supporting documents are lodged with the MCS. An export permit is then forwarded to the specified customs checkpoint. Customs verification typically aims at ensuring that the goods to be exported match those on the registered declaration. A certificate of origin may be issued by the MCS if applicable.

3.3.2 Export taxes, charges, and levies

3.54. The Export Import Act continues to provide for a 50% export duty on the f.o.b. value of ambergris, a whale secretion used as a fixative for perfumes. The authorities indicated that the tax is for revenue generation, as ambergris is a high value item. There has been only one shipment of ambergris since 2012. As of 2012, the 5% royalty on the f.o.b. value of fish exports was replaced by the BPT, and the re-export royalty was abolished (Section 4.2.1.4)

3.3.3 Export prohibitions, controls, and licensing

3.55. In general, export prohibitions are imposed to comply with international obligations for environmental, public health and intellectual property reasons. Exports of certain marine species remain prohibited for environmental reasons.16 Exporters are subject to the same licensing requirements as importers (Section 3.2.5).

3.3.4 Export assistance

3.56. The authorities indicated that there is no insurance or guarantee specific to export activities. The Export Import Act provides for a duty exemption on items used to add value to exports from the poultry, agriculture and fisheries sectors. Additional assistance may take the form of the provision of cold storage facilities, ice, or loans at a concessionary rate.

3.57. Support in the form of business development services or concessionary loans are available to micro, small and medium enterprises, including for earmarked projects promoting import substitution, or exports (Section 3.4.4).

3.3.5 Export-processing zones

3.58. Under the 2014 Special Economic Zones Act17, economic zones dedicated to special activities, including export processing zones, can be established (Section 3.4.2.3). The decision to grant a permit for the development and operation of such a Zone is based on factors such as the potential of the investment in terms of employment, the facilitation of the export of local goods and products, and the transfer of knowledge or technology. Benefits from participating in an SEZ involve, inter alia, temporary exemption from the BPT (Table 3.5). No SEZ had been established by end-October 2015.

16 Bait fishes (used for pole and line fishing); big eye scads (less than six inches); black coral; black

coral necklaces; boulder coral; branching coral; conch (triton) shell; coral; dolphin; eels; lobster and lobster meat; mother of pearl shells; parrot fish; puffer fish; ray skin; rays and skates; trochus shell; turtles and their eggs, turtle shells and shell products; giant clam; shark, shark products; napoleon wrasse; whale shark; and whales.

17 Special Economic Zones Act, No. 24/2014. Unofficial translation. Viewed at: http://investmaldives.org/investmaldives/wp-content/uploads/2014/09/SEZ-Act-Translation.pdf.


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3.3.6 State trading

3.59. The Maldives Industrial Fisheries Company Limited (MIFCO) is the main state-trading entity involved in exports. It was never notified to the WTO (Sections 3.2.7 and 4.2.1.3.2).

3.4 Measures Affecting Production and Trade

3.4.1 Standards and other technical requirements

3.4.1.1 Standards, testing, and certification

3.60. The Maldives Standard and Metrology Unit (MSMU) is the national standards body. Established under the authority of the MED, it has the mandate to: develop an appropriate set of national standards and technical regulations; assess conformity to national and international standards; ensure that the metrology of retailers and producers are accurate; and ensure the protection of heath and the rights of consumers. There is still no specific law related to standards, testing and certification in Maldives. A bill was being drafted at the time of the previous TPR, and is still under preparation.

3.61. Major achievements since the last TPR include the establishment of a metrology laboratory and the introduction of a halal certification scheme. Furthermore, Maldives received capacity-building and technical assistance from UNIDO under the project entitled "Market Access and Trade Facilitation Support for South Asian LDCs through Strengthening of Institutional and National Capacities related to Standards, Metrology, Testing and Quality (SMTQ)".18 Phase 2 of the project was implemented between November 2007 and December 2011 and has contributed to, inter alia, strengthening the MSMU; developing a plan for the control of sub-standard and hazardous imported products; and the strengthening and accreditation of the National Food Testing Laboratory. Metrology cells were established in several regions and some awareness campaigns were organized in the areas of standards relating to occupational health and safety management (OHSAS 18000 series) and good hygiene practices (for the fishing industry). Phase 3 of the project was launched in July 2014 and was aimed at strengthening the capacity of the MFDA for the establishment of a national food control system. With assistance from UNIDO, the MSMU has drafted some standards related to fish, fish products, and management systems.19 These standards are yet to be adopted. An audit by UNIDO's Independent Evaluation Group deemed the appropriation by the MSMU to be limited due to staff shortage and turnover.20

3.62. At the regional level, Maldives is collaborating with other SAARC countries in standards harmonization in sectors deemed of key trade interest, with the goal of enhancing intra-regional trade. In this context, the South Asian Regional Standards Organization (SARSO) was established in August 2011 with the objective of harmonizing standards in the following five sectors: food and agricultural products; jute, textiles and leather; building materials; chemicals and chemical products; and electrical and electronic products. It became operational in April 2014.

3.63. Maldives is not a member of the International Organization for Standardization. It is neither a member of the International Electrotechnical Commission, nor a participant in its Affiliate Country Programme.

3.64. According to notifications to the WTO, the MED is indicated as the national enquiry point and national notification authority under the TBT Agreement. Since 1995, Maldives has not submitted any notification to the WTO TBT Committee. No specific trade concern has been raised in the Committee regarding Maldives.

18 The project was targeted at four LDCs from the SAARC (Bangladesh, Nepal, Bhutan and Maldives),

and aimed at strengthening their export capacity and industrial development. Phase 1 of the project was implemented between 2003 and 2007.

19 Drafts standards on food products are available online at: http://standards.gov.mv/drafts/ds_foodproducts.php.

20 UNIDO (2012).


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3.4.1.2 Sanitary and phytosanitary (SPS) requirements

3.65. The MFDA is the regulatory authority in this area. Its mandate includes food safety and the development of standards, regulations and laws related to food (including MRLs and MLs settings). It is the competent authority for food exports, and the contact point for Codex Alimentarius. The Health Protection Agency is the enforcement agency for food hygiene, including food inspection. However, its competencies for the inspection of imported and exported food products were transferred to the MFDA with effect from 1 November 2015. Inspections are carried out by MFDA agents posted at the borders. The preparation of legislation, regulations and standards related to food control are under the responsibility of the Food Control Division of the MFDA.

3.66. The MFDA's National Health Laboratory (NHL) is the national testing laboratory for food products, including fish products for export. The MFDA achieved accreditation for the general requirements for the competence of testing and calibration (ISO 17025) for its microbiology and chemical laboratories respectively in 2008 and in 2010.

3.67. Fish exports generally adhere to the standards required by export markets. An audit carried out in January 2013 by the EU's Food and Veterinary Office found Maldives' regulatory framework for fishery products to be generally in accordance with the EU requirements.21 The report highlighted some improvements in the implementation of the official control, and noted some deficiencies, particularly in the area of Hazard Analysis and Critical Control Points (HACCP) plan implementation.

3.68. A draft food bill was submitted to the Attorney General in June 2014 for review, but has not yet been enacted. Regulations related to breast-milk substitutes were approved in 2008, and will be implemented on 1 January 2016.

3.69. Maldives has not submitted any notification to the WTO SPS Committee. Imports of eggs and egg products from countries on the WHO list of bird flu affected countries is prohibited on SPS grounds. Maldives is a member of the FAO's Codex Alimentarius, and the World Organisation for Animal Health (OIE). The MFDA is the contact point for Codex Alimentarius, and the Ministry of Fisheries and Agriculture is the contact point for the OIE.

3.4.1.3 Marking, labelling, and packaging

3.70. Packaged food products (bottled, packaged or canned) are subject to labelling in accordance with prescriptions set out under the Consumer Protection Act of 1996 and relevant implementing regulations. In 2014, the MFDA issued the standards applicable to the labelling of pre-packaged foods.22 Labelling requirements include: the name of the food; a list of ingredients; processing aids and carry-over of food additives; net contents and drained weight; the country of origin (if its omission would mislead or deceive the consumer); lot identification; date marking; and storage instructions. Food imports are subject to similar labelling requirements.23 According to the authorities, the main challenge in the area concerns products being labelled in foreign languages other than English.

3.71. Since 2004 and in accordance with the Tobacco Control Act (Act No. 15/2010), tobacco products are subject to textual warning covering 30% of the packaging.

3.72. In accordance with international practices24, the MFDA maintains a set of regulations related to breast-milk substitutes.25 The legislation also covers labelling and marketing requirements for these items, and is to be enforced starting 1 January 2016. Labelling is to be in accordance with Codex requirements, and is to be provided in the local language.

3.73. Although Maldives has no restrictions on the importation or production of GMO food, labelling requirements apply.

21 European Commission (2014). 22 National Standards for Labelling Pre-packaged Food, MFDA-FCD STAN 4-2014. 23 MFDA Announcement No. IUL 23-AP/01/2011/039. 24 WHO's International Code of Marketing of Breast-Milk Substitutes. 25 Regulation on Import, Produce and Sale of Breast-Milk Substitutes in Maldives (MFDA-FS/R1:2008).


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3.4.2 Taxation and tax incentives

3.74. Between 2009 and 2014, tax revenues increased nearly fourfold to Rf 10.4 billion (Table 3.4), representing 22.4% of GDP. The goods and services tax (GST), including on tourism goods and services, accounted for 42.5% of these revenues. The contribution of bank profit tax declined by half to 4.6%, while the recently introduced business profit tax accounted for 22.8% and is the second largest contributor to tax revenues (after the general GST). Import duty remains a non-negligible source of government revenue in Maldives; although its importance has declined sharply as a result of the introduction of these new taxes and a unilateral tariff liberalization initiative in 2011. In 2014, import duties accounted for 16.5% of total tax revenue compared to over two-thirds in 2009 and 2010.

Table 3.4 Structure of tax revenue, 2009-14

(Rf million and %) 2009 2010 2011 2012 2013 2014 Total tax revenue (Rf million) 2,732 2,931 4,893 6,880 8,873 10,436 (% of total) Import duty 67.7 70.1 52.9 19.9 17.8 16.5 Tourism (bed/green) tax 19.5 20.4 15.3 11.7 9.7 7.8 Bank profit tax 9.0 6.9 4.7 4.6 4.0 4.6 Goods and services tax n.a. n.a. 5.0 14.6 17.3 14.2 Tourism goods and services tax n.a. n.a. 13.6 22.6 24.3 28.5 Airport service charge 0.1 1.2 6.9 4.4 3.9 4.2 Business profit tax n.a. n.a. 0.7 20.4 21.2 22.8 Other 3.8 1.3 0.9 1.9 1.8 1.5

n.a. Not applicable.

Source: Ministry of Finance and Treasury (2015), Budget in statistics, financial year 2015, Male. Viewed at: http://www.finance.gov.mv/v2/uploadedcontent/posts/Post1464-2015.pdf.

3.4.2.1 Indirect taxes

3.4.2.1.1 Goods and services tax

3.75. A GST was introduced in 2011.26 The GST Act made the distinction between two categories of GST: a general goods and services tax (general GST) and a tourism goods and services tax.

3.76. The general GST is levied at a standard rate of 6% of the transaction value and is collected at the point of sale. In 2014, the GST was extended to telecommunication services and sales of immovable properties. In addition, the tax rate on domestic air transportation services was differentiated for locals at 6% and foreigners at the standard 12% rate (see below). Exemption applies to the following goods and services (provided that they are provided by a supplier that is registered with the authorities): electricity services; water facilities; postal services; sewerage facilities; education and health services; drugs and medical devices authorized for sale or supplied by registered pharmacies; financial services; rent earned from the lease of immovable property; payments collected as fines; flats, land and buildings sold by the Government under social housing schemes; and international transportation services.

3.77. The legislation provides for a zero rate tax on exports, transfers of a going concern, and some goods and services deemed as essential (as provided in Schedule I of the GST Act).27

26 GST Act (Law No. 10/2011), unofficial translation (Consolidated Version, 12 November 2015). Viewed

at: https://www.mira.gov.mv/TaxLegislation/GST_Act_Consolidated_English_20151112.pdf. 27 Rice, sugar and flour (provided it is imported by the STO and sold at controlled prices); salt; milk;

cooking oil; eggs; tea leaves; deep sea fish, reef fish, all types of fish packed in Maldives, and fish paste (rihaakuru); potatoes and onions; ingredients used in making curry paste (cumin, fennel, coriander, turmeric, garlic, ginger, chili, chili powder, cinnamon, cardamom, peppercorn, and any other such ingredient); dhiyaahakuru, coconuts (kaashi, kurun’ba, rukuraa, and kurolhi); carrots, cabbage, beans and tomatoes; all kinds of fruits; bread, buns and rusks; baby diapers; baby food; cooking gas; diesel; petrol; and adult diapers (GST Act, Schedule 1).


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Businesses registered as suppliers of zero-rated goods or services may claim tax credits for the GST paid on their inputs.

3.78. In the tourism sector, the GST was initially levied at the rate of 3.5% and then raised gradually to 12% as of November 2014 (Section 4.5.2). The tax applies to goods and services considered as tourism goods and services. These include: goods sold and services supplied by tourist resorts, tourist hotels, picnic islands, guest houses, tourist vessels and yacht marinas authorized by the Ministry of Tourism; goods sold and services supplied by diving schools, shops, spas, water sport facilities, and any other such facility on authorized tourist establishment; goods sold and services supplied by authorized travel agency service providers; goods sold and services supplied to foreign tourist vessels entering Maldives with their local agent; and goods sold and services provided by domestic air transportation service providers to persons other than Maldivian citizens.

3.4.2.1.2 Bed/Green tax

3.79. The tourism bed tax expired in January 2014, in accordance with provisions of the GST Act. It was reinstated briefly between April and November 2014 at the rate of US$8 per night bed (Section 4.5.2). As of November 2015, it was replaced with a green tax levied at the rate of US$6 per bed night, payable in US dollars.28 The green tax applies to tourist resorts, tourist hotels and tourist vessels (including foreign vessels) registered with the Ministry of Tourism. Foreign tourist vessels are liable for the duration of stay of the vessel. Maldivians and resident permit holders staying at these establishments are not required to pay the tax. The intended purpose of the green tax is for the management of waste from local resorts and other islands. With its specific rate, the tax is likely to have a disproportionate effect on small and medium businesses compared to larger facilities. The authorities indicated that the tax does not apply to guest houses.

3.4.2.1.3 Other taxes

3.80. Other internal taxes include the duty-free royalty, levied under the Law Governing Duty-Free Areas in Maldives (Law No. 9/81). All duty-free shops are liable to pay a monthly royalty calculated as a percentage of sales as follows: 12.5% for cosmetics, perfumes, liquor, tobacco, lighters, sportswear and toys; 10% for electronic games and florists; 7.5% for confectionery, leather products and clothing; 3.5% for jewellery, stationery, books and magazines; 1.5% for cameras, watches and other electronic items; and 5% for other items.29

3.81. Non-tax revenues are derived from the tourism land rent (for resorts and hotels built on land owned by the Government) charged at the rate of US$8 per square meter; and an airport service charge amounting to US$12 and US$25 (since July 2014), respectively, for nationals and foreigners departing from an international airport.

3.4.2.2 Direct taxes

3.82. The introduction of a BPT in 201130 extended profit taxes from banks to most businesses. The BPT is levied at the rate of 15% on the portion of profits in excess of Rf 500,000 (US$32,425). Profits from sources outside of Maldives (and above the threshold) are imposed at the rate of 5%. The legislation also introduced a withholding tax at the rate of 10%, without deduction. This applies to payments made in the following circumstances: rent of properties; royalties; payments made for carrying out research and development, or for the use of computer software; management fees; fees for technical or personal services; payments for performances by public entertainers; rent and royalties paid to screen cinematographic films; and other commissions or fees that are not classed as employment income. The unfavourable foreign investment royalty was repealed (Section 2.7).

28 Green Tax Regulation (No. 2015/R-181), unofficial translation. Viewed at:

http://www.mira.gov.mv/TaxLegislation/Green_Tax_Regulation_(English).pdf. 29 Regulation Governing Duty-Free Business in Maldives. Viewed at:

https://www.mira.gov.mv/docs/Duty%20Free%20Regulation.pdf. 30 Business Profit Tax Act (Act No. 5/2011), unofficial translation. Viewed at:

https://www.mira.gov.mv/TaxLegislation/BPT%20Act%20English%20Translation_v2.pdf.


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3.83. There is currently no personal income tax in Maldives. A Personal Income Tax Bill was introduced to the Parliament on 20 June 2011 (together with the Corporate Profit Tax Bill), but the approval process was suspended due to the uncertain political environment.31 A revised Bill was submitted on May 2013.

3.84. Banks, charities and investors benefiting from an agreement are exempted from the BPT. Bank profits remain taxed at the rate of 25%, under the Law on Taxing Profits of Commercial Banks operating in Maldives (Act No. 9/85). There is no tax-free threshold.

3.4.2.3 Tax incentives

3.85. Under the Law on Foreign Investments (Act No. 25/79), foreign investors may be exempted from the BPT. The terms of the exemption are negotiated with the MED, and are to be specified in the investment agreement.

3.86. The 2014 Special Economic Zones Act aims at providing an overarching framework for the granting of tax incentives (Sections 3.3.5).32 SEZs can take many forms, including: industrial estates; export processing zones; free trade zones; enterprise zones; free ports; offshores financial services; and high technology parks (Sections 2.7 and 4.5.3.1.2). The incentives include exemption from import duty (on capital goods), BPT, GST, withholding tax, taxes on the sale and purchase of land, the option upon negotiation on a case-by-case basis of freehold land to registered companies in Maldives with at least 50% local shareholding, and relaxed/flexible rules to bring and recruit expats for employment (Table 3.5 and Section 3.4.6).

Table 3.5 Tax exemption incentives to investors, investments and businesses in SEZs

BPT BPT on dividends

GST Withholding tax

Import dutya

SEZs Developers of SEZ (including provision of other basic services)

x x 10 years 10 years x

Manufacturing, logistics, transportation, building, ports and communication services

20 years 15 years 10 years 10 years x

Building and operation of airports


Hotel, tourism and commercial real estate


Education, health and housing 10 years 10 years 10 years 10 years x Sports 5 years 5 years 5 years 5 years x Financial services 10 years 5 years 10 years 5 years x Research and development 10 years 10 years 10 years 10 years x Other businesses 5 years 5 years 5 years 5 years x

a Import duty exemption is with respect to capital goods imported mainly for the development, management and operation of the Zone.

x The duration of the exemption was not available.

Source: Special Economic Zones Act, Schedule 1 (Act No. 24/2014).

3.87. The SEZ framework is reserved for relatively large-scale investments (in excess of US$150 million) in activities and sectors considered as aligned with the strategic priorities of the Government. These include: export processing activities; transhipment port, international logistics, port, airport, bulk breaking, bunkering, and docking services; university, tertiary hospital, super specialty hospital, and research and development facilities; Information Communication Technology (ICT) parks and related facilities; international financial services; oil and gas exploration; and initiatives that are considered as introducing new technologies into Maldives. By end-October 2015, no SEZs had been established. The authorities indicated that a number of potential developers had expressed interest. In the 2016 Budget, revenue from SEZ projects are

31 Asian Development Bank (2015b). 32 Special Economic Zones Act (Act No. 24/2014), unofficial translation. Viewed at:

http://investmaldives.org/investmaldives/wp-content/uploads/2014/09/SEZ-Act-Translation.pdf.


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projected to be Rf 1.5 billion, accounting for 5.2% of the total estimated revenue.33 Implementing regulations are to be published soon.34

3.4.3 Financial assistance

3.88. Domestic support is provided mainly through tax incentives and direct payments. In the agricultural sector, Rf 49.5 million was provided to farmers in 2013 through direct payments (Section 4.2.2). Support to the fisheries sector continues to be provided mainly through fuel subsidies (Section 4.2.1). Consumer subsidies and cross-subsidization in the form of price controls/fixing below production cost are in place in the energy sector (Section 4.4).

3.4.4 Other forms of assistance

3.89. The 2013 Small and Medium Enterprises (SME) Act provides for additional forms of assistance to businesses registered as micro, small or medium enterprises (MSMEs).35 It envisages the creation of centres with the goal of providing business development services to MSMEs and supporting the development of related clusters, value chains, and market access. It also provides for the creation of a loan scheme with the objectives of, inter alia, improving credit access and providing a mechanism where borrowers can improve and demonstrate their creditworthiness. In November 2015, the Government launched a Rf 50 million loan scheme for MSMEs, in accordance with the provision of the SME Act.36 About 40% of the resources are to be earmarked for projects promoting women's participation, youth entrepreneurship, import substitution, or exports. The loan scheme is available to businesses registered as an MSME with 100% Maldivian ownership.

3.90. Some commercial banks are offering financial products targeted at specific groups (mainly youth and women). Islamic financing programmes are also available for SMEs operating in the following sectors: fisheries and agriculture, construction, transport, and tourism (guest house innovation and upgrading).

3.4.5 Government procurement

3.91. Maldives is not a party to the WTO Agreement on Government Procurement (GPA), or an observer to its Committee. The total value of the government procurement market for goods and services in Maldives was around Rf 4.3 billion in 2014, or 9.2% of GDP (Table 3.6). The Public Sector Investment Programme and Operational Services are the two major areas for public procurements, accounting for 39.3% and 30.5%, respectively, of the total public procurement amount in 2014.

Table 3.6 Government procurement, 2009-14

2009 2010 2011 2012 2013 2014

Total (Rf million) 3,113 3,090 3,201 2,857 3,617 4,319

By threshold (% of total)

below Rf 2 million 55.2 39.3 62.6 59.0 39.2 53.4

Rf 2 million and above 44.8 60.7 37.4 41.0 60.8 46.6

By item (% of total)

Supplies and Requisites 11.1 10.2 11.0 15.1 10.7 11.4

33 Haveeru, "Maldives adopts controversial budget with no amendments", 23 November 2015. Viewed

at: http://www.haveeru.com.mv/state_budget_2016/64203. 34 Ministry of Economic Development (2015b). 35 Individuals or legal entities are classified as an MSME depending on the number of full time

employees and its annual income or turnover. Entities with no more than 5 employees and a turnover of up to Rf 500,000 are categorized as micro enterprises. Small enterprises are defined as entities with 6 to 30 employees and a turnover of between Rf 500,001 and Rf 5 million. Medium enterprises are entities with 31 to 100 employees and a turnover of between Rf 5,000,001 and Rf 20 million. If the business does not meet the two thresholds, the number of full time employees determines the final categorization (Business Development Service Center (BDSC) online information. Viewed at: http://bdsc.com.mv/sites/default/files/SME%20APPLICATION%20FORM_0.pdf).

36 Online information. Viewed at: http://www.presidencymaldives.gov.mv/?lid=11&dcid=16113 [30.11.2015].


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2009 2010 2011 2012 2013 2014

Operational Services 28.4 28 31 36.2 28.7 30.5

Supplies and Requisites for Service Provision 5.4 3.9 2.1 2.3 4.1 7.7

Repairs and Maintenance 4.4 3.9 4 6.8 2.7 4.8

Development Projects 16.4 2.7 5.1 3.1 1.1 0.1

Public Sector Investment Programme 30.0 48.1 42.7 30.6 50.6 39.3

Capital Equipment 4.3 3.1 4.1 5.8 2.0 6.2

Source: Information provided by the authorities.

3.92. Government procurement is regulated by the Public Finance Regulation's (PFR) Chapter 8 and the 2009 PFR Chapter 15.37 The regulations cover procurements carried out by government agencies using public resources. For procurements related to defence or national security, the application of rules and procedures may be modified. A new draft PFR 2015 was expected to be gazetted in November 2015 and to come into force in 2016.

3.93. According to the authorities, the core principles of government procurement remain efficiency, transparency, accountability, fairness, competition, value for money, and the promotion of the economy. Procurement regulations serve to, inter alia, ensure transparency and accountability in public procurement and promote private sector participation. Competitive bidding in the form of open tendering (in the case of procurements for goods and works) and requests for proposals (for consulting services) is regarded as the best way to achieve these objectives.

3.94. Different procuring methods are used for contracts of different values. Single source procurement may be used for contracts below Rf 1,000. For contracts between Rf 1,000 and Rf 25,000, the items can be purchased directly. However, at least three quotations should be received and the lowest one should be chosen. For contracts above Rf 25,000, specific tender procedures under the Regulations have to be invoked.38

3.95. Open tendering is the most frequently used method. When the contract value is below Rf 1.5 million, procuring agencies may organize the procurement independently. Centralized procurement is required if the contract value exceeds Rf 1.5 million. The Tender Evaluation Section of the Ministry of Finance and Treasury undertakes centralized procurement on behalf of the procuring entity. The final decision on contract award is made by the National Tender Board (NTB) whose members are appointed by the President and represent both public and private sector professionals. If the procurement value is estimated to be above Rf 10 million, the procurement entity may choose to invite international bidders, while, if it is less than Rf 1.5 million, the entity may choose to invite only local contractors. Projects funded by external grants or loans need to follow the procurement regulations set by the funding agency.

3.96. Government procurement is also used as a policy instrument to help domestic suppliers of goods and services to raise their participation in government procurement contracts. In addition to the possibility of restricting bids to local suppliers (for procurements of Rf 1.5 million or less), preferential treatment to domestic suppliers may also be granted in the form of a margin of preference in the evaluation of bids. Such a margin is not to exceed 7.5%.

3.97. Publication in The Gazette is required for all tender invitations (procurements above Rf 25,000). In addition, tender notices for procurements between Rf 25,000 and Rf 1.5 million are to be published on the website of the procuring entity or its notice board. Notices for tenders above Rf 1.5 million are to be published on the website of the Ministry of Finance and Treasury, while those for tenders above Rf 10 million are to be published in international websites and newspapers. In practice, tenders are published in medias within the region.

37 While the 2009 Public Finance Regulations Chapter 15 has been enacted, it has not yet been

published in the Gazette, but its provisions are being followed by virtually all government agencies. 38 Under the newly drafted PFR, for contracts below Rf 1,500, the items could be purchased from the

market directly. For contracts between Rf 1,500 and Rf 35,000, at least three quotations should be received and the lowest one should be chosen. For contracts above Rf 35,000 it should be publicly advertised and a minimum of three bids must be received from which the lowest evaluated one is chosen.


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3.98. No appeals mechanism is currently in place. When potential breaches arise in tendering, bidders may file complaints to the Tender Evaluation Board (TEB) for review. However, the neutrality and effectiveness of the review is in doubt, as the TEB is not an independent complaint review body.39 Other channels of recourse include filing a complaint to the anticorruption board or a legal case to the court.

3.99. While the whole financial management system has been improved, a 2014 report by the Asian Development Bank identified potential risks of corruption, including collusive practices in government procurement, and suggested that capacity constraints and lack of effective internal controls in public agencies be tackled in coming years.40 The authorities indicated that some tools have been developed to address these issues. These include: the use of a modern computer system for procurements of less than Rf 1.5 million; the centralization through the TEB for transactions above Rf 1.5 million; and the setup of a monitoring mechanism within the Ministry of Finance and Treasury to review transactions above Rf 1.5 million. Furthermore, there is a plan to launch a web portal by the end of 2015. Other tools include the conduct of workshops on procurement for government agencies, and the publication of standard bidding documents.

3.4.6 Local-content requirements

3.100. There is no legislation specific to local content requirements. The Law on Foreign Investments (Law No. 25/79) encourages foreign investors to use domestically produced raw materials and to employ locals, subject to availability and commercial viability. The authorities indicated that the provision is not enforced.

3.101. The 2014 Special Economic Zones Act requires the number of expatriate staff in advisory, technical, or supervisory positions in SEZs not to exceed 10% (for each single investment project) (Section 3.4.2.3). Exceptions may be granted on a case-by-case basis. Quotas for foreign employees are sector-specific and are issued by the Department of Immigration and Emigration.

3.4.7 State involvement in the economy

3.102. State involvement in the Maldivian economy remains widespread, with close to 100 companies (fully or partially owned by the Government, some are in liquidation) operating in various sectors of the economy, including trade, finance, transport, fishing, utilities, and tourism (Table A3.3 and Sections 3.2.7, 3.3.6, 4.2.1, 4.4.1, 4.5.2, 4.5.3 and 4.5.5).

3.103. The State Business Privatization Act (No. 3/2013) determines the procedures for the privatization, corporatization, monitoring, evaluation and introduction of shares of state owned properties to the stock exchange as stated in the Constitution. The legislation establishes the Privatization and Co-privatization Board as the agency in charge of monitoring and evaluating privatization and co-privatization of SOEs.

3.104. SOEs operate under the Companies Act. The Government appoints the board members of SOEs in proportion to the structure of their ownership. Boards and SOEs do not report to line ministers. Some SOEs operate as statutory or de facto monopolies, while others are subsidized, giving them an advantage over the private sector. These advantages may include preferential rates and fees for state land, and government guarantees for domestic and external loans. The Government may also tender procurement directly to any SOE if it is in the company's line of business. Therefore, some projects to be implemented by the Government are carried out by SOEs.

3.105. The Companies Act requires all companies with capital of over Rf 1 million, whether public or private, to be audited by a public accountant or chartered accountant approved by the Auditor General (or the Auditor General's office in the case of SOEs).41

39 IMF (2010). 40 Asian Development Bank (2014). 41 Companies doing business in Maldives with sales over Rf 5 million have to be audited by MIRA's

auditor.


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3.4.8 Competition policy and price controls

3.106. Maldives does not have a competition law, although there are plans to formulate one. Hence, mergers and acquisitions are not subject to approval. Sector-specific legislation is in place for telecommunications to ensure the accessibility and reasonably low price of telecommunication services.

3.107. The 1996 Consumer Protection Act prohibits certain business conducts, such as unfair discrimination among consumers, keeping goods without offering them for sale, attaching conditions to the sale of goods, and false advertisements. It also reserves the right for the ministry in charge of trade to control the price of a good or a service. Selling goods or services above the fixed price is prohibited. Only rice, flour and sugar have to be sold at the price designated by the Government (Section 3.2.7).

3.4.9 Intellectual property rights

3.108. Maldives acceded to the WIPO Convention in 2004. However, it is not a signatory to any of the treaties administered by WIPO. The authorities indicated that the country would join once the national legislation is in place. The country is receiving technical assistance from WIPO in this regard.

3.109. Intellectual property-related works are under the responsibility of the Intellectual Property Unit (IPU) of the MED. Its mandate includes the registration and protection of IP rights related to logos, trademarks, business names, copyright, and geographical indications. Since its establishment in 2007, the IPU has launched several campaigns to educate businesses, investors, entrepreneurs, the general public, and other stakeholders on aspects of IP rights. The Unit faces many challenges, including a shortage of expertise and a relatively high staff turnover.

3.110. Maldives has benefited from the WTO decision to extend the transition period for LDCs to provide protection for IP under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement until 1 July 2013. The Council for TRIPS reviewed Maldives' legislation in this area at its meeting on 5 June 2012, and took note of steps taken to comply with the TRIPS Agreement, which include the establishment of the IPU, public awareness campaigns, and the ratification of the copyright law.42

3.4.9.1 Industrial property

3.111. Maldives does not have any specific law related to the protection of patents and trademarks. A trademark bill and an industrial property bill were drafted with the assistance of WIPO. The authorities indicated that these bills are being translated into the local language before submission to Parliament. In the meantime, registration of patents is on a first-in-time, first-in-right basis. The authorities indicated that cautionary notices are not required.

3.112. Maldives is not a signatory to the Paris Convention for the Protection of Industrial Property. Maldives is not a signatory to the Patent Cooperation Treaty.

3.113. There is no legislation on the protection of geographical indications (GI). According to the authorities, there is a particular interest in the protection of Maldives fish (hikikandumas) as a GI. A GI bill is in the process of translation into the local language by the Attorney General's Office.

3.114. Maldives does not have any legislation on new plant varieties, layout-designs of integrated circuits, or undisclosed information/trade secrets.

3.4.9.2 Copyright and related rights

3.115. In October 2010, the Parliament passed the Copyright and Related Rights Act43, providing for the protection of literary and artistic works, and the establishment of a registration system for them. Implementing regulations were adopted in April 2011. Under the legislation, works are

42 WTO document IP/C/M/70, 1 October 2012. 43 Copyright and Related Rights Act, No. 23/2010.


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protected by the sole fact of their creation. Rights are protected during the life of the author and for 50 years after his death (or that of the last surviving author). The legislation also covers works that are eligible for protection in accordance with any international convention or agreement to which Maldives is party. The authorities indicated that there is currently no such a convention. There is a fee of Rf 1,000 for the initial registration of copyright. Monthly fees of Rf 60 are applicable to trademarks and logos.

3.116. The legislation provides for the establishment of a collective society but it has not yet been established. A draft Collective Management Organization Regulation is being finalized.

3.4.9.3 Enforcement

3.117. The institutional framework for IP protection in Maldives remains weak. According to the authorities, violation of copyright and trademarks remains prevalent. With the establishment of the IPU, several awareness programmes focused on copyright infringements, and capacity-building programmes have been developed. The authorities indicated that lack of awareness and resources for enforcement are the main challenges in the area. Technical assistance in raising general awareness, introducing IP into the education system, would be needed.


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4 TRADE POLICIES BY SECTOR

4.1 Introduction

4.1. During the review period although the average MFN tariff protection was reduced for all sectors, government intervention in the form of tariff and non-tariff measures continued to distort competition and adversely affect resource allocation and thus productivity. State involvement in the economy remains widespread across key sectors though additional scope was given to private investors in certain activities (e.g. air transport). Nevertheless, private-sector involvement in certain activities remains relatively weak (except in tourism), presumably due to crowding out by the state-owned enterprises and the relatively high cost of doing business in Maldives.1

4.2. Despite its declining share of GDP (1.4% in 2015) the fisheries sector continues to be of major importance to the Maldivian economy as it accounts for nearly all (97.4%, 2014) merchandise exports; following the loss of preferential access to the EU market, some fish exports were partly diverted into other markets. During the review period, tariff protection for the activity was reduced significantly, although most tariff lines relating to fish and fish products remain unbound. Fisheries subsidies are in the form of direct payments to support fuel costs (2009-14), a minimum income level during the low season (2014 onwards), and the installation of equipment for on-board ice making facilities and for conversion of bigger fishing vessels to engage in longline fishing. The longline fishing policy and regime were changed to reflect illegal fishing and overfishing developments as well as domestic fishermen's interests/concerns; foreign participation in this type of fishery was ceased in 2010 and a catch allocation-based individual transferable quota (ITQ) scheme was established in 2014. The state-owned Maldives Industrial Fisheries Company (MIFCO) continues to enjoy considerable monopsony power as it holds exclusive rights in purchasing and processing skipjack tuna in two of four zones. The value-based charge on fish exports was replaced by a direct taxation system in 2012.

4.3. Notwithstanding its land limitations and climatic risks, agriculture remains a crucial sector in terms of employment and therefore poverty reduction. Domestic producers receive support in the form of direct payments mainly distributed to compensate for loss of income due to natural disasters; as from 2014 direct payments were replaced with insurance schemes for farmers as well as concessional loans to support agricultural development. While average tariff protection to agriculture was reduced, tariffs on tobacco and alcohol products were increased for heath, religious and revenue purposes, and as of end-October 2015 the MFN applied rates for 52 tariff lines exceeded their bound rates. Staple foods (i.e. ordinary rice, flour and sugar) continue to be imported mainly through the majority government-owned enterprise State Trading Organization (STO) and are sold at government-controlled prices involving a subsidy.

4.4. Development of manufacturing remains limited and state involvement seems to persist in a few key areas through, inter alia, STO's and MIFCO's activities. As of 2014, tax and non-tax incentives support activities of firms located in special economic zones (SEZs) but no such zones were in place at end-October 2015. Although tariff protection of manufacturing was reduced – except for some chemicals, cosmetics, soaps, tyres, textiles, motor vehicles, buses, and motor vehicle parts where it was increased – it remained slightly higher than the overall average applied MFN tariff and much higher than rates levied on agricultural items. As of 2015, applied MFN rates on 271 tariff lines exceeded their bound level.

4.5. Maldives remains fully import dependent on petroleum-based fuels with key activities like tourism and fishery being the main energy consumers. Action is being taken both at the border and investment level to promote renewable energy and address several constraints. State involvement in the energy sector was strengthened with the establishment of a second state-owned electricity company to achieve operational efficiency and ensure 24-hour electricity access to island communities. As electricity tariffs remain expensive by international standards, two types of subsidies equivalent to 0.7% of GDP (2014) are paid directly to households, some of which also benefit from cross-subsidization at the expense of businesses subject to much higher tariffs.

1 The authorities indicated that private investors operate in fishing, banking, insurance, housing finance,

money transfer, construction, water and sewerage, wholesale, telecommunications, airport operations, freight forwarding, education and healthcare.


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4.6. Services remain by far the largest sector of the economy (accounting for more than 80% of GDP and over 90% of total goods and services exports) with tourism being the largest activity and the largest generator of government revenue. The limited commitments of Maldives under the GATS remain unchanged. Tourism-related taxes and revenue were increased during the review period. Although tourism facilities are predominantly locally-owned, state involvement was apparently increased mainly through joint ventures, and the lease period for islands or land was extended under certain conditions. New legislation in the financial sector covered Islamic banking, prudential requirements, and prevention of money laundering and terrorism financing. Consequently, to capture a part of the market, a new Islamic bank was established and the offer of Shariah type financial products was expanded. The banks' capital adequacy ratio rose, but their minimum reserve requirement was reduced. Despite a recent drop, the relatively high level of non-performing loans (NPLs) remains a concern. State involvement in fixed-line communications was somewhat reduced in recent years with the state firm's (Dhiraagu) shareholding opening to public investment in late 2011; efforts were made to reduce its dominance in other telecoms segments. Other major developments include a new National Broadband Policy aimed, inter alia, at extending broadband Internet access to all the inhabited islands as well as the introduction of mobile number portability and the extension of the existing broad-based goods and services tax (GST) to telecommunications. Cabotage restrictions persist in both maritime and air transport activities. During the review period, the supply of international airline services was increased with the arrival of new operators and the expansion of airport capacity, whereas a lower GST rate benefited the domestic air transport of locals. On the other hand, state involvement in port and airport ownership and handling remained relatively unchanged.

4.2 Fisheries and Agriculture

4.2.1 Fisheries

4.2.1.1 Features

4.7. Despite its declining share of GDP (from 2.2% in 2009 to 1.4% in 2015) due to the reduction in fish catch and, as from 2013, the significant fall in international tuna prices, the fisheries sector continues to be of major importance to the Maldivian economy (Tables 1.2 and 4.1); it accounted for nearly all (97.4%) merchandise exports and employed 10% of the total workforce in 2010.2 The GDP and employment shares indicate that labour productivity in fisheries is relatively low; no total factor or labour productivity data for this activity since 2009 were available from the authorities. Due to its geographical nature, Maldives has diverse, albeit of low abundance, marine resources within its 200-mile exclusive economic zone (EEZ) (see below). Between 2009 and 2014, total fish catches were volatile, varying between 116,700 tonnes and 128,700 tonnes (Table 4.1). Tuna (skipjack, yellowfin, and bigeye) account for nearly 93% of the total catch, with snapper, grouper, and other varieties making up the rest. The main export market for fish is Thailand, which takes over 33% of exports for use in its canning industry (Section 1.6). Almost all dried and salted fish is exported to Sri Lanka, and yellowfin tuna caught is primarily exported to Europe in fresh and chilled form. Fish products canned in Maldives are exported mainly to the European Union, where they benefited from tariff and quota preferences until 2013 (Section 2.6.4).3 Following the loss of preferential treatment in the EU market, exports of fresh and chilled fish were partly diverted into other markets such as those of the United States and the Middle East.

2 Maldives Monetary Authority (2015a). 3 Despite its graduation from LDC status, Maldives continued to have access to the EU market under the

Everything-But-Arms Initiative until the end of 2013, which allowed the country to have a longer period to adjust to the eventual removal of preferential market access. In 2011, EU represented 52% of its fish exports while in 2014 its share dropped to 38%. (UN document CDP2012/PLEN/12, Note by the CDP Secretariat on Maldives for the Committee for Development Policy Expert Group Meeting Review of the list of Least Developed Countries 16–17 January 2012. Viewed at: http://www.un.org/en/development/desa/policy/cdp/ldc_documents/maldives_monitoring_report_2012.pdf; and EU online information. Viewed at: http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150983.pdf).


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Table 4.1 Fishing indicators, 2009-15

2009 2010 2011 2012 2013 2014a 2015a Contribution to GDPb (%) 2.2 2.1 1.9 1.6 1.7 1.5 1.4 Growth of fishing GDPc (%) -2.6 -5.7 -1.1 -0.7 8.2 -0.9 -0.7 Total fish catch ('000 tonnes) 116.7 122.2 120.8 120.0 129.8 122.0 ..

- of which: skipjack tuna (%) 56.7 60.3 47.7 44.5 57.3 53.2 .. Total fish exports ('000 tonnes) 39.8 33.5 38.2 40.6 49.6 48.2 ..

- value (US$ million) 72.0 68.3 120.6 156.1 161.3 139.1 .. Number of fishermen ('000) 14.4 11.7 11.0 10.0 9.3 8.8 .. Number of mechanized fishing vessels .. .. .. .. .. .. ..

.. Not available.

a Estimates. b Based at current prices. c Based on constant 2003 prices.

Source: Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/statis.php.

4.2.1.2 Policy, legislative and institutional framework

4.8. Maldives continues to lack a comprehensive fisheries management policy.4 Under the assistance of the Japanese International Cooperation Agency (JICA), at end-October 2015, the Ministry of Fisheries and Agriculture (previously Ministry of Fisheries, Agriculture and Marine Resources) (MoFA), which remains responsible for regulating the sector and formulating policy, was in the process of preparing a fisheries master plan. Despite a fairly comprehensive draft Fisheries Bill circulated in 2004 and withdrawn from the Parliament due to some concerns, the sector's regulatory framework remains relatively unchanged. Fisheries are regulated under Law 5/87 and the Regulation for Issuing the Licence to Fish in the Exclusive Economic Zone of the Republic of Maldives, which differentiate between near-coast and high-seas fisheries and stipulate the permissible methods of fishing. The regulatory instruments are applied through licensing systems. Maldives became a member of the Indian Ocean Tuna Commission on 13 July 2011, and in November 2012 it also certified pole and line fishery as a sustainable fishery product under the Marine Stewardship Council; the Council provides for eco-labelling of fish and other marine products and a fishery certification programme to contribute to the health of the world's oceans.

4.2.1.3 Domestic measures

4.2.1.3.1 Fishing

4.9. Commercial fishing in Maldives remains differentiated by distance. Near-coast fishing (0-150 nautical miles (NM)) is carried out using traditional wooden hulled and fibre re-enforced masdhoanis and is concentrated on skipjack tuna and yellowfin tuna primarily using pole and line and handline techniques. Masdhoani owners are required to be Maldivian citizens; additionally, the vessels must be registered and the owners must have a licence to fish. The licence stipulates the permissible fishing methods, which include: pole and line, longline, trolling and hand line. Under the licensing regulation, fishing vessels are only required to obtain a licence if they intend to sell their catch to processors or exporters and gain a financial profit. Hence, fishing vessels intending to fish for their own consumption are not required to obtain a licence; however, these vessels also submit data to MoFA. As of 4 June 2015, there were 712 (979 in 2008) licensed fishing vessels in Maldives of which 695 were mechanized masdhoanis and 5 mechanized vadhudhoanis (trolling vessels).5

4.10. During the review period, the longline fishing policy and regime were changed to reflect illegal fishing and overfishing developments as well as domestic fishermen's interests/concerns.6

4 WTO document WT/TPR/S/221/Rev.1, 5 November 2009. 5 WTO document WT/TPR/S/221/Rev.1, 5 November 2009; and Ministry of Fisheries and Agriculture

online information. Viewed at: http://www.fishagri.gov.mv/images/Fishing_License_Report_-_4th_June_2015.pdf.

6 The authorities indicated that local pole and line and handline vessels equipped with better engines started operating further into the sea, and there were many reports of illegal fishing and transhipment at sea by licensed foreign fishing vessels. Resolution 14/06 on establishing a programme for transhipment by


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Longline fishing takes place between 100 NM and the high seas beyond Maldives' 200-NM exclusive economic zone (EEZ) where the main species caught is bigeye tuna. The MoFA ceased granting licences to foreign vessels in 2010.7 To harvest the bigeye tuna resources in Maldives' EEZ the Government decided to reserve longline fishery for locals in November 2011; however, at the initial stage, few operators showed interest mainly because it was a new type of fishery for them and they had limited expertise. Under the regulation for longline fishing for tuna (Regulation No. 2014/R-388), the vessels have to be 100% locally-owned and have a minimum of 20% local crew. They are also permitted to fish in the high seas beyond Maldives' EEZ. In 2015, 35 vessels were issued licences to operate as longline vessels. In 2014, the Government changed the longline fishery regime into a catch allocation-based individual transferable quota (ITQ) scheme based on its fleet development plan.8 The longline regulation provisions set buying/selling catch quotas, exchanges of quotas and auctioning of quotas. Annual quotas for longline are sold from 1 June to 31 May of the following year. In 2014, 11,800 MT of quotas was announced of which 96.3% was used. The authorities consider that the ITQ increased the licensing revenue generated from fisheries, raised the amount contributed by longline vessels and provided a competitive platform for the companies. During the first year of its operation, it raised revenue of Rf 6.8 million in quota fees; however, in 2015, this revenue was expected to decrease as a result of the decline in fish catch and the departure of some companies from fishery activities.

4.11. A Vessel Monitoring Programme for all commercially licensed fishing vessels is now in place; 156 vessels are monitored by MoFA and the Maldives Coast Guard. Vessel Locating Devices are to be installed in all fishing vessels by mid-2016. The number of apprehensions by the Maldives Coast Guard due to illegal fishing over the last few years has dropped significantly as many Maldivian vessels now venture 150–180 NM offshore and the number of reported sightings of foreign fishing vessels has dropped. MoFA has carried out internal investigations and has taken action against infringements by 5 local vessels in 2014.

4.12. In 2014, Maldives replaced all direct fisheries subsidies with a contribution-based insurance scheme which guarantees a minimum income level of Rf 10,000 during the low season. Fuel subsidies, introduced in 2009 in response to the hike in global oil prices, in the form of direct payments, were provided to fishermen until 2013; no such subsidies were paid in 2011.9 The 2012 and 2013 subsidies had not been reserved exclusively for fuel; funding was set aside for measures to encourage investment in ice plants (Section 4.2.1.3.2) – for which there was apparently a high demand, as well as in on-board ice making facilities and the conversion of bigger fishing vessels to engage in longline fishing. In 2013, Rf 50 million in fisheries subsidies was directly allocated on the basis of the engine horsepower of the vessels; another Rf 25 million was to be used to install fish aggregating devices, Rf 23 million for the setting up of ice plants and freezing mechanisms, and Rf 1 million to determine fishing grounds via satellite imagery.10 The authorities consider that the magnitude of the subsidies provided to fishing is relatively insignificant.

4.2.1.3.2 Fish processing and MIFCO

4.13. The purchase and processing of skipjack tuna remains divided into four zones. Under the existing rules, private enterprises apply for licences to process and export tuna. The application is evaluated on the basis of the procurer's capacity needs in the designated zone. Currently, MIFCO, a state-owned company, holds exclusive rights to buy and process tuna in two (zones two and four) of the four zones and as such has monopsony power; furthermore, MIFCO is permitted to

large-scale fishing vessels banned sea transhipments for such vessels, which have to report to a port for transhipment activities. Indian Ocean Tuna Commission (2015).

7 The longline fleet used to be foreign-owned and operated in the EEZ beyond 100 miles under licence and joint-venture arrangements. Ministry of Fisheries and Agriculture (2014).

8 Assuming that the number of fishing vessels leaving and entering skipjack pole and line and yellowfin handline fishery remains constant, the Government felt the changes in capacity could be used to develop longline fishery to target bigeye tuna. Indian Ocean Tuna Commission (2015).

9 Ministry of Fisheries and Agriculture online information Viewed at: http://www.fishagri.gov.mv/index.php/en/ministry/downloads/176-fuel-subsidies-en; FIS article, "President announces resumption of fishing subsidies", 18 April 2012. Viewed at: http://www.fis.com/fis/worldnews//search_brief.asp?l=e&id=51521&ndb=1&monthyear=&day=6&country=130&df=1; and online information. Viewed at. http://fisheriessubsidies.blogspot.ch/2012/12/maldives-65-million-dollars-fuel.html.

10 Haveeru, "Committee decides on fisheries, agriculture subsidies", 28 May 2013. Viewed at: http://www.haveeru.com.mv/news/49227.


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procure fish in the other two zones, but it does not have the exclusive right to do so. In each of the other two zones, two private companies hold licences. In practice, MIFCO purchases more than 90% of pole- and line-caught fish in zones two and four and the rest is bought by SMEs and the local community for making smoked tuna. According to the authorities, between 2009 and 2014 MIFCO's share of total skipjack and yellowfin tuna exports dropped from 38% to 10%. MIFCO's activities have never been notified to the WTO and according to the authorities this is due to capacity limitations (Section 2.5.2). A 2015 audit of MIFCO found that the company had suffered an even larger loss after it was restructured into three independent companies (MIFCO, Kooddoo Fisheries Maldives Limited, and Felivaru Fisheries Maldives Limited) in 2010 for the purposes of minimizing loss, increasing investor interest, and stabilizing its financial state; the three companies were merged back into one by the Government in August 2014.11 A financial restructuring of MIFCO was under consideration at end-October 2015.

4.14. MIFCO procures fish from vessels holding a valid fishing licence. Vessels give priority when selling their catch to processing companies, including MIFCO, before selling it to others. MIFCO has a higher share in skipjack tuna processing and is a price maker. However, in yellowfin tuna processing, MIFCO's share is smaller compared to private companies and it does not have influence in setting the prices. MIFCO pays a fixed, albeit higher than the international market rate, price for the catch, thereby ensuring the wellbeing of fishermen and the fishing community. Due to intense competition among fishing companies, in most cases all private companies are de facto forced to maintain the same price as MIFCO. Despite the dramatic decline in the international market prices for frozen fish from 2013 onwards, MIFCO did not bring down its buying price for a number of reasons. No information on the gap between international and MIFCO's domestic purchase prices from 2009 onwards nor the extent to which this price differential affects MIFCO's and the operators' international competitiveness was available from the authorities.

4.15. There are 13 EU-certified tuna-processing facilities, and 39 small-scale producers of traditional products (salted, smoked and dried fish). At present, there are two canneries in place; one is situated in the north and owned by MIFCO, and the second in the south, where most fish is caught, is privately owned by Horizon Fisheries. Construction of a new MIFCO plant is under way at the Addu Atoll. This project is divided into two phases: one consists of establishing 1,500 MT of cold storage and related support services, including facilities to procure fish from fishermen daily; and the second is to include processing facilities.

4.2.1.4 Border measures

4.16. During the review period, tariff protection accorded to the activity was reduced significantly. As of 2015, applied MFN tariffs on fish imports averaged 5.9% (16% in 2008), which is relatively low compared with the overall average applied MFN tariff of 13.9% (21.4% in 2008) (Table A3.1); this drop relates mainly to the increase in the number of tariff lines at zero rate. However, most tariff lines relating to fish and fish products remain unbound, which gives the Government considerable leeway to raise tariffs on these products if the need arises, although this did not occur during the review period.12

4.17. Since 2003, all export shipments require a health certificate for quality control purposes. The value-based export charge (tax) called "royalty", which varied according to the species, was replaced by the business profit tax as from 2012 (Section 3.4.2.2). No data on past "royalty" rates, their valuation basis, and the revenue collected since 2009 were available from the authorities.

11 MIFCO handled the handline yellowfin operation, Kooddoo Fisheries procured fish in zone four and

exported fish in frozen form, and Felivaru Fisheries procured fish in zone two and canned it. Splitting MIFCO was not beneficial cost wise, because resource pooling and synergy was lost. As each company had its own board and management, the cost of managing them increased, and in zone two fish collection was not sufficient to operate the Felivaru cannery at its full capacity. Haveeru article, "More loss to MIFCO with restructuring: audit report", 16 February 2015. Viewed at: http://www.haveeru.com.mv/business/59094.

12 Only 8 tariff lines are bound (coral and similar materials, products of fish and crustaceans, molluscs or other aquatic invertebrates not elsewhere specified, and dead fish).


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4.2.2 Agriculture

4.2.2.1 Features

4.18. Agriculture remains a crucial sector in terms of national development goals, poverty alleviation and sustainable livelihood, nutritional status of the people, retention of foreign currency, and employment.13 During the review period, the share of agriculture in GDP was relatively stable at slightly more than 2% (Table 1.2), and 40% of the rural population is employed in some manner in the sector. Similar to fisheries, the GDP and employment shares indicate that labour productivity in agriculture is relatively very low and no total factor productivity data since 2009 were available from the authorities. The total land area of about 300 km2 is divided among 1,192 coral islands that are unstable and subject to change in size, shape, elevation, and position on reef platforms. Climatic risks to the agriculture sector are exacerbated by limited cultivable land (27 km2), low elevation (80% of total land area is less than 1 meter above mean sea level), poor soil quality, and scarce water resources. There are 48 uninhabited islands that have been leased out for 21-year periods for commercial farming purposes; these may be leased only to Maldivian companies and individuals. Approximately, 75% of the inhabited islands also have some agricultural production. The main products cultivated are watermelon, papaya, coconut, pumpkin, tender coconut and mango. Food imports meet approximately 90% of the country's tourism-driven food demand. Maldives is self-sufficient only in fish; as a result, food security is one of the principal objectives of agricultural policy.

4.2.2.2 Policy

4.19. Under the Seventh National Development Plan (2006-2010) and Strategic Action Plan of 2009-2013, government policy was to be focused not just on food security, but also on: ensuring sustainability of the sector; improving human resource capacity in the sector; increasing the capacity for technology generation and dissemination; improving agricultural trade and marketing infrastructure; and ensuring a suitable nutritional intake of the population. Consequently, since 2009 agriculture has diversified into poultry farming, goat raring and value adding activities such as the production of virgin coconut oil (VCO), chilli sauce and taro to make chips. Enhanced technologies such as soil-less mediums, like hydroponics and autopot systems, have been introduced. In order to build better linkage between the farmer and the market, six value chain cooperative societies (VCCO's) have been established. At end-October 2015, a new National Development Strategy that would possibly address agricultural matters was announced (Section 2.4).

4.2.2.3 Domestic measures

4.20. On 16 October 2014, direct payments to compensate domestic producers for loss of income were replaced with two insurance schemes: the accident insurance scheme to support farmers who may be injured in farm activities, and the crop insurance scheme to compensate them for any loss of agricultural produce due to natural disasters such as floods, heavy rains and tsunamis etc. Agricultural development soft loan programmes have been in place since 2013; the loans have targeted smallholder farmers wishing to upgrade their farming activities with innovative technologies and value-adding activities. In 2011, input subsidies totalling Rf 31.9 million were disbursed to 10,112 farmers. In 2013, out of Rf 50 million allocated for agricultural subsidies, Rf 49.5 million were to be distributed directly to the farmers, whilst Rf 500,000 were to be used for administrative purposes.14 In 2014, a budget of Rf 50 million was allocated for subsidies; however, this amount has not been disbursed to farmers as the policy for its allocating was being revised by the Government. Between 2009 and 2015, a total amount of Rf 24.4 million has been disbursed to 446 farmers who are beneficiaries of soft loans at an interest rate of 6%, with a 6-month grace period and a payback period of 5 years.

4.2.2.4 Border measures

4.21. Similar to fisheries, tariff protection for agriculture was reduced during the review period. As of 2015, applied MFN tariffs on agricultural imports averaged 11.3% (17.2% in 2008), compared

13 Mahfuz Ahmed and Suphachol Suphachalasai (2014). 14 Haveeru article, "Committee decides on fisheries, agriculture subsidies", 28 May 2013. Viewed at:

http://www.haveeru.com.mv/news/49227.


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with the overall average applied MFN tariff of 13.9% (21.4% in 2008) (Table A3.1). Applied MFN tariff rates range from zero to 766.7% (beverages, spirits and tobacco) (Table A3.1); the authorities indicated that the increase in the peak rate was for health protection purposes. Furthermore, the tariff rates applied to alcohol products were increased on religious grounds as well as due to them being a luxury item consumed mainly by tourists and to address the persistent budget deficit issues. Cigarettes (7 tariff lines) are subject to a specific duty of Rf 1.25 per stick. All tariff lines (except for HS 15.04.30 – fats and oils and their fractions, of marine mammals) relating to agricultural products (WTO definition) are bound; 94.6% of agricultural tariff lines are bound at 30% and the remaining 5.3% are bound at 300%, thus providing considerable leeway to raise tariffs on these products if the need arises. For 52 tariff lines the MFN applied rate stands at 50% and for one tariff line the MFN applied rate equals 35% while all are bound at 30%.15

4.22. Staple foods, such as ordinary rice, flour and sugar, are imported mainly through the majority government-owned enterprise State Trading Organization (STO) and are sold at government-controlled prices which according to the authorities are necessary to keep inflation rates low and to ensure access to food by the most vulnerable populations (Sections 3.2.7, 3.4.8, 4.2.2.4, 4.4.3, 4.5.2 and 4.5.3.2).16 Although any importer can import staple food items, most importers choose to abstain due to their controlled price. The Government provides only to the STO an amount of Rf 0.40 per kg sold of staple food (rice, flour and sugar) to recover the overhead cost of handling and storing these products. No further information was available on STO's exclusive import or distribution rights, its procurement methods, pricing, or traded values/volumes since 2009.

4.3 Manufacturing

4.3.1 Features

4.23. During the review period, the share of manufacturing in GDP ranged from 4.3% (2010) to 6% (2012) (Table 1.2). No total factor productivity data since 2009 were available from the authorities. The development of the manufacturing sector remains limited due to the small size of the domestic market, limited availability of skilled labour and high dependence on imported materials. The main industries include fish processing, food and beverage products, boat building, handicrafts, furniture, garments, PVC pipes, and soap.

4.3.2 Domestic measures

4.24. Under the Special Economic Zones Act 24/2014, since September 2014 several incentives have become available to developers and firms set to operate in special economic zones (SEZs), though no SEZs were in place by end-October 2015 (Section 3.4.2.3).

4.25. State involvement in the sector seems to persist. Fish processing, which is the main industry, is geared towards exports and is dominated by small and medium-sized enterprises, including the state-owned MIFCO (Section 4.2.1.3.2). The STO (Sections 3.2.7, 3.4.8, 4.2.2.4, 4.4.3, 4.5.2 and 4.5.3.2) continues to import directly, repack and/or distributing certain products such as food and beverages, construction materials (e.g. cement and steel roofing products) and medical supplies.17 The authorities indicated that the STO does not have exclusive import rights for cement, basmati rice and condensed milk. No further information was available on STO's exclusive import or distribution rights, its procurement methods, pricing, or traded values/volumes since 2009.

4.3.3 Border measures

4.26. During the review period, tariff protection for manufacturing was reduced. As of 2015, applied MFN tariffs on imports of manufactures averaged 14.5% (22.2% in 2008), slightly higher

15 These items consist of live dangerous animals, pig products (e.g. pig fat, lard, animals fats and oils of

swine, margarine containing swine, and pork meat), food preparations and juices containing alcohol (e.g. sugar confectionary containing wine, chocolates containing alcohol, and fruit juices containing spirits), and residues and waste of the food industry.

16 The Government owns 81.6% of STO's shares; no single party other than the Government directly or indirectly owns more than 5% of the shares of the company. State Trading Organization (2015).

17 State Trading Organization (2015).


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than the overall average applied MFN tariff of 13.9% (21.4% in 2008) (Table A3.1). Applied MFN tariff rates ranged from zero to 400% (sheets, plates and foils of polythene, plastic sacks and bags, textiles and certain made-up articles) (Table A3.1). The higher average level of MFN tariff protection was provided to: transport equipment; arms and ammunition; plastics and rubber and articles thereof; works of art, and precious stones and pearls; and, raw hides and skins. As indicated by the authorities, under the 2015 amendment to the Import/Export Law, tariff increases affected some chemicals, cosmetics, soaps, tyres, textiles, motor vehicles, buses, and motor vehicle parts (tyres, glass safety, locks, engines, and motor parts); on the other hand, import duties for gold, garments and luxury sea vessels were reduced to zero. Virtually all (99.3%) tariff lines relating to manufactured products are bound; 96.9% of manufactured items' tariff lines are bound at 30% and 2.4% are bound at 300%. As of 2015 applied MFN rates on 271 tariff lines exceeded their binding level.18

4.4 Energy

4.27. Energy supply remains a key driver of economic development.19 No total factor productivity data since 2009 were available from the authorities. The main supply of energy includes diesel, petrol, liquefied petroleum gas (LPG), kerosene, and Jet A1 fuel; diesel accounted for 84% in 2010, 80% in 2011 and 70% in 2012 of Maldives' energy mix. Indigenously-produced and supplied energy accounts for about 0.1% of the total energy supply. Energy consumption increased from 224,000 tonnes of oil equivalent (TOE) in 2002 to 699,898 TOE in 2014 – driven mainly by rising demand for electricity and transportation.20 Petroleum-based fuels are a major import in Maldives, accounting for 31.0% of total imports (the largest category) in 2012, with total dependence on imports for power generation. Maldives is extremely vulnerable to oil price variations. In 2014 alone, Maldives spent US$552 million on importing fossil fuels (around 18% of the GDP), an increase from US$470 million in 2012, (around 23% of the GDP). Tourism (1/3 of the total energy consumption) and fisheries remain the main energy consuming activities.

4.28. Maldives' 2010 energy policy objectives consisted of: providing access to an affordable and reliable supply of electricity; achieving carbon neutrality in the energy sector by 2020; promoting energy conservation and efficiency; increasing national energy security; promoting renewable energy technologies, strengthening the management capacity of the energy sector; adopting an appropriate pricing policy; ensuring customer protection; and enhancing the quality of energy services.21 The energy strategic action plan for 2014–2017 is being formulated and several of the key priorities are expected to remain the same; it was expected to be published in October 2015. According to the Asian Development Bank, the energy sector faces several constraints including inadequate financing for energy-sector investments, limited sector-level planning, low levels of energy efficiency, and barriers to renewable energy investment.22

4.29. Maldives has potential for significant renewable energy (RE) resources, especially solar and some pockets of wind.23 Use of solar energy has been growing as a result of its popularity and a drop in market prices; it is used in resorts for water heating purposes. Solar photovoltaics (PV) systems are now increasingly used to feed the electricity grids in some islands including the capital Male.24 As of today, the total installed capacity of solar PV systems is 4 MW. According to the Asian Development Bank, barriers to RE development include: the absence of an adequate institutional

18 For 93 tariff lines the MFN applied rate stands at 35% while the bound rate is 30% (explosive, fireworks, tyres of rubber, mechanical appliances and electrical machines); for 169 tariff lines the MFN applied rate equals 50% while all are bound at 30% (tyres of rubber, engines and other equipment for vehicles); for 4 tariff lines the MFN applied rate equals 100% while all are bound at 30% (freon); for 10 tariff lines the MFN applied rate equals 400% while all are bound at 30% (plastic plates, sheets, film, foil; plastic boxes, plastic packaging); for 5 tariff lines the MFN applied rate is 150% while the bound rate is 30% (smoking pipes, and cigar or cigarette holders); and, 1 tariff line's MFN applied rate equals 400% while its bound rate is 300% (bags of plastic).

19 Maldives Energy Authority (2014). 20 Asian Development Bank online document (undated), "Interim Country Partnership Strategy:

Maldives, 2014–2015 Sector Assessment (Summary): Energy". Viewed at: http://www.adb.org/sites/default/files/linked-documents/icps-mld-2014-2015-ssa-01.pdf.

21 Ministry of Housing and Environment (2010). 22 Asian Development Bank online document (undated), "Interim Country Partnership Strategy:


23 Lopez (2015). 24 Maldives Energy Authority (2014).


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framework for implementation and monitoring; the lack of standardized instruments to support investments, including tariff schemes and power purchase agreements; and, the lack of availability of capital linked to investment risk perceptions. An increased share of renewable energy will help reduce reliance on oil imports, reduce the pressure on the balance of payments, improve Maldives' fiscal position, and contribute to enhancing energy security.25

4.30. Action was taken to promote RE in Maldives. The Government has set import duties for RE-related products to zero, and is formulating policies and regulations to promote renewable energy integration. In addition, research on feasible alternative energy sources is to be undertaken. In 2012, Maldives formulated a medium-term investment plan to scale up renewable energy investments (including large-scale renewable energy development) to meet the rising demand for electricity and to increase national energy security.26 The Investment Plan is designed to include investments from both the public and private sector. Whilst the public sector component will be achieved through grant assistance and loans (currently pending), specific mechanisms (e.g. investment guarantees for payment of electricity sold) have been developed to leverage finances for RE investments from the private sector. The first programme of the Investment Plan, Preparing Outer Islands for Sustainable Energy Development (POISED), is administered by the Asian Development Bank (ADB), and is mainly focused on public sector investments; its key focus is to rehabilitate existing power systems in the islands and install about 21MW of RE. Under this programme, procurement of 2.5 MW of solar PVs and the rehabilitation of power systems in 5 islands was initiated in February 2015. The second programme of the Investment Plan, Accelerating Sustainable Private Investments in Renewable Energy (ASPIRE) is administered by the World Bank; it is focused on creating project structures conducive to private-sector participation, with appropriate project frameworks and agreements for making the project bankable and attractive for private entities, and with the aim of installing a total of 20 MW of solar PVs. The first project under the ASPIRE programme aims to install 4 MW of solar PVs in Male and Hulhumale in 2015 on a "design, build, finance, own, operate, and transfer" basis.

4.31. As of 2012, RE initiatives included: a contract to connect the main islands in the Male area with a 132kV link, coupled to a 20MW wind farm and a gas back‐up power station; a 3.7 MW waste to energy project for Thilafushi; introducing a low level of solar PVs 200 kW (about 30% of peak load) on Thinadhoo; and, a possible substantial solar roof programme on the new warehouses proposed for Thilafushi.27 Most RE energy projects were held up as a result of poor contracts, lack of guarantees by central government, or poor understanding by utilities of how to enter and manage such contracts. In September 2014, the ADB approved a US$50 million grant in support of renewable energy initiatives that form part of a larger US$124 million project co-financed by the European Investment Bank and the Islamic Development Bank for Maldives to lower its dependence on fossil fuels by 2019, as well as to reduce energy sector subsidies.

4.32. In 2014, a government taskforce identified significant potential for supply- and demand-side energy efficiency through measures such as development of equipment codes and standards, measures for public buildings, and generator upgrades.28 As of end-October 2015 the authorities had undertaken only sensitization campaigns, and they were working on an energy rating and labelling system for electrical appliances as well as the replacement of incandescent with candescent lamps.

4.4.1 Electricity

4.33. The share of electricity (and water supply) in GDP dropped slightly during the review period and stood at 1.1% in 2014 (Table 1.2). Nearly 100% of all electricity, the main type of energy utilized, is generated by diesel-based systems; transmission losses are low at 7% to 8%, and theft is negligible.29 Among the main demand factors increasing the pressure on energy supply are a

25 IMF (2015); and Lopez (2015). 26 Asian Development Bank online document (undated), "Interim Country Partnership Strategy:


27 Unknown author, online document, "SREP Investment Plan - Republic of the Maldives", 7 February 2012. Viewed at: http://co2.org/wp-content/uploads/2012/12/Maldives-SREP-last-version-from-MM.pdf.

28 Asian Development Bank online document (undated), "Interim Country Partnership Strategy: Maldives, 2014–2015 Sector Assessment (Summary): Energy". Viewed at: http://www.adb.org/sites/default/files/linked-documents/icps-mld-2014-2015-ssa-01.pdf.

29 Maldives Energy Authority (2014).


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high population growth of 3% per year, a high urbanization trend, and growing tourism.30 All tourist resort islands have their own private electricity production, mostly used for cooling. Although Maldives has solid plans to meet growing demand for electricity, the geography of the country works as a barrier to grid connection. Furthermore, the low elevation combined with the narrow width of the islands makes powerhouses and associated infrastructure vulnerable to flooding and damage from severe weather events. Electricity demand is expected to double by 2020, led by an increase in usage by resorts.31 According to World Bank data, Maldives stands 108th in the ranking of 189 economies on the ease of getting electricity, which is below several South Asian countries but above India.32

4.34. During the review period, the sector was consolidated with the setting up of a second state-owned utility company; this consolidation is expected to support sector level planning.33 Until 2009, the State Electricity Company (STELCO), a loss-making entity, was the sole integrated utility responsible for generation and electricity supply in about 28 islands, including Male, while island cooperatives were responsible for providing electricity for over 150 outer islands (of a total of 200 inhabited islands and 100 island tourism resorts). A structural change in 2009 gave STELCO the responsibility to provide electricity services to the greater Male region and nearby atolls. As a result of this change, STELCO currently provides electricity services in 33 islands in Kaafu Atoll, Alif Alif Atoll, Alif Dhaal Atoll and Vaavu Atoll. STELCO generated losses of around Rf 28.5 million in 2013 and Rf 57 million (unaudited) in 2014.34 In 2009, six new regional utilities were set up and given electricity supply responsibilities for the non-STELCO licensed areas. As of mid-2012, these six regional utilities serving the outer islands were integrated into FENAKA Corporation Limited — a new utility company set up to provide electricity, water, and sewerage services to all inhabited islands in Maldives, with the exception of the greater Male region; the assets and human resources of the previously established six utility companies were transferred to the corporation. As the electricity system in the islands taken over by FENAKA was poorly designed and inefficient, there were losses in both generation and distribution. Consequently, FENAKA has to spend on extra fuel and further maintenance making the company a loss-making business. To date, FENAKA has made efforts to upgrade its power systems, has rehabilitated some of its powerhouses and has installed new generator sets in some islands. Due to its geographical nature, Maldives has no national grid. In September 2014 STELCO signed an MOU with a Chinese company to develop 100-MW LNG power plant in Thilafushi Island and a 132-kV power grid connecting all islands in the greater Male region via subsea cable. In addition, Male and Hulhule will be connected by a 132-kV grid via the future Male–Hulhule bridge. In this regard, the Greater Male Central Power Station project has been formulated to interconnect the islands Male, Hulhumale, Villimale, Thilafushi and Gulhifalhu by building a central power station in Thilafushi. Feasibility studies are ongoing for the project. Whereas, at the time of the previous TPR, the Government considered privatizing STELCO and had sought expressions of interest from potential investors, at present there is no plan to privatize either STELCO or FENAKA.35

4.35. The Government is developing a medium-term sector plan based on (i) expected growth in demand in greater Male and the outer islands, (ii) an evaluation of technology options and choices to be considered for adoption over different time frames, (iii) the nature and modality of investment required, and (iv) a risk-mitigation framework to support such investments.36 The Ministry of Environment and Energy (MEE) formulated a draft electricity bill to provide a basis for policy and regulatory decision making. According to the ADB, changes in the sector require

30 Mahfuz Ahmed and Suphachol Suphachalasai (2014). 31 Asian Development Bank online document (undated), "Interim Country Partnership Strategy:


32 World Bank (2014a). 33 Ministry of Environment and Energy (2012); and online Asian Development Bank document

(undated), "Interim Country Partnership Strategy: Maldives, 2014–2015 Sector Assessment (Summary): Energy". Viewed at: http://www.adb.org/sites/default/files/linked-documents/icps-mld-2014-2015-ssa-01.pdf.

34 The authorities indicated that the losses were mainly due to the accounting of finance costs related to its 4th power project from 2013 onwards, and a revaluation of assets which led to a substantial increase in depreciation. In spite of the losses, STELCO is able to maintain a steady cash flow due to some interest grants and other leniencies afforded by the Government.

35 The low regulated electricity price was an obstacle to privatization (WTO document WT/TPR/S/221/Rev.1, 5 November 2009).

36 Asian Development Bank online document (undated), "Interim Country Partnership Strategy: Maldives, 2014–2015 Sector Assessment (Summary): Energy". Viewed at: http://www.adb.org/sites/default/files/linked-documents/icps-mld-2014-2015-ssa-01.pdf.


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prioritized action on technical, licensing, and other regulations; existing institutions have limited capacity to undertake these or other activities.

4.36. Electricity tariffs in Maldives are expensive by world standards. They are among the highest in South Asia, at around US$0.40 per kWh (several times higher than in other countries in the region); most families are highly constrained in their use of power even though it is nominally available at the socket and subsidies apply.37 The Maldives Energy Authority (MEA), the regulator, sets electricity tariffs at domestic, commercial, and government rates based on a November 2009 tariff methodology and structure; they were last set in 2009 and are the same for all power suppliers.38 A correction mechanism through a fuel surcharge whenever the diesel price is above Rf 8 per litre was introduced in order to adjust end-user tariffs to the variation in fuel prices, which represent above 80% of total costs. The fuel surcharge mechanism is added to the monthly invoices. At a price of about US$1 per litre of diesel, the fuel surcharge amounts to about 45% of the final bills.39 During the review period, the fuel surcharge ranged from Rf 0.06 per kWh to Rf 2.47 per kWh. As of March 2015, it represented a 25.7% increase in the highest residential tariff and 20.7% in the non-residential tariff.40 According to the authorities, assuming that generation and transmission costs represent the total cost of STELCO, it is only marginally covered by the electricity tariffs.

4.37. In 2009, the Government also introduced a subsidy scheme for domestic consumers to make access to electricity affordable for average households and address rising fuel prices at that time.41 The electricity tariffs are reduced by these subsidies. Two types of direct subsidies are paid for domestic customers: fuel surcharge subsidies and usage subsidies. The fuel surcharge for domestic customers (although reflected in the customer's bill) is paid in full by the Government. Under the usage subsidy, amounts of up to 400 units are subsidized for those customers who claim it under the social welfare scheme. On average, for certain consumer categories, 40% to 50% of the customer's bill is written off through government subsidies for the fuel surcharge and usage paid to the service providers. According to the authorities, the total amount disbursed each year for subsidies for the fuel surcharge and usage was Rf 77.6 million (2010), Rf 165 million (2011), Rf 270.5 million (2012), Rf 332.9 million (2013), and Rf 346.4 million (2014) or 0.7% of GDP (2014); the fuel surcharge subsidy represents the largest part of these amounts and stood at about 81% of the total amount disbursed in 2014. Furthermore, cross-subsidies among consumer categories are in place; electricity tariffs charged to governmental and business consumers are higher than those billed to residential users, although the costs are roughly similar for all consumers. As of March 2015, electricity for residential consumers was cross-subsidized by up to 114% higher tariffs charged to commercial, government and "institutes" users.42

4.4.2 Hydrocarbons

4.38. Maldives remains almost fully dependent on imports of hydrocarbons for its energy mix. The sector continues to be characterized by state involvement in the STO (Sections 3.2.7, 4.2.2.4, 4.3.2, 4.4.3 and 4.5), which is the leader in the fuel and gas industry, through its affiliates, i.e. Fuel Supplies Maldives (FSM), STO Maldives (Singapore), Maldives National Oil Company (MNOC) and Maldives Gas (MGPL).43 In addition to the STO, which is the main supplier of hydrocarbon products to the Maldives Airports Company Limited, STELCO, FENAKA and a few companies in the private sector (e.g. Villa Shipping and Trading Company, Coastline Investment) are involved in the fuel supply business. As of 2014, the Government, based on past seismic data, envisaged embarking on ambitious oil and gas exploration in Maldives with the support of global leaders.44

37 Unknown author, online document, "SREP Investment Plan - Republic of the Maldives", 7 February

2012. Viewed at: http://co2.org/wp-content/uploads/2012/12/Maldives-SREP-last-version-from-MM.pdf. 38 Tariffs for each group are fixed using an ad hoc method (trying to produce small adjustments to

previously existing tariffs) and a reconciliation test (assuring that with the approved tariffs each region is capable of collecting the allowed revenues). Ministry of Environment and Energy (2012).

39 Ministry of Environment and Energy (2012). 40 STELCO online information, "Electricity tariffs". Viewed at: http://www.stelco.com.mv/tariff.php. 41 Ministry of Environment and Energy (2012). 42 STELCO online information, "Electricity tariffs". Viewed at: http://www.stelco.com.mv/tariff.php. 43 State Trading Organization (2015). 44 Oil exploration vessels use seismic airguns to explore oil fields under the seabed. The airguns' sound

waves are among the most intensive and loudest noises mankind is capable of producing, and can be deadly for marine animals. Oil exploration activities as well as planned test drillings pose a serious threat to the local


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4.39. Fuel is priced based on its international market price at the time of purchase (Mean of Platts of Singapore). Fuel price subsidies have been provided in fisheries and power production (Sections 4.2.1.3 and 4.4.1).

4.5 Services

4.5.1 Features

4.40. Services continue to be the largest sector of the economy. The share of services in GDP remains relatively stable at above 80%, and at 90.8% of total exports (goods and services) in 2014 (Tables 1.2 and 1.3). No total factor productivity data since 2009 were available from the authorities. Tourism remains the most important subsector, followed by government services, transport, real estate, communications and financial services.

4.41. The commitments of Maldives under the GATS remain unchanged.45 Its Schedule of Specific Commitments covers very few subsectors in business services (i.e. certain professional services, and computer and related services) and there is no list of exemptions. However, it maintains a relatively liberal regime in most service sectors, such as tourism, telecommunications, financial services, and transport (although the latter is subject to some cabotage restrictions).

4.5.2 Tourism

4.42. Tourism remains Maldives' largest activity and the largest generator of government revenue; it accounted for 28.1% of GDP in 2015 and over 6% of total employment in 2010 (Tables 1.2 and 4.2). However, as tourism is a cross-sectoral industry, which serves as a link and stimulus to almost all other sectors of the economy, such as transport, construction, trade, and financial services, its overall contribution to GDP and total employment were estimated to be 78.1% and 62% respectively in 2014.46

4.43. Between 2009 and 2014, the number of facilities offering accommodation increased from 235 to 508, and the number of beds increased by 33.6% (Table 4.2). In 2014, there were 112 (94 in 2008) resorts, of which 75 (74 in 2008) were leased to locals, 17 (8 in 2008) had foreign leaseholders and 19 (12 in 2008) were leased to joint-venture companies. However, in terms of management and operation, 45 (44 in 2008) resorts were managed by locals, 47 (33 in 2008) had foreign management, and 19 (17 in 2008) were managed by joint-venture firms. In tandem with capacity growth, tourist arrivals also showed robust growth, rising by 83.7% during the same period; occupancy also increased whereas tourism receipts per bed night and average length of stay declined (Table 4.2). The composition of tourists is changing as Chinese tourists assisted, inter alia, by improved air services to Maldives (Section 4.5.5.2) are compensating for the weaker demand from Europe, which is mostly the result of weaker economic conditions in Europe, including the sluggish performance of the Russian Federation's market, and travel advisories that followed the political events in Maldives.47

4.44. The industry remains predominantly locally owned, and state involvement was apparently increased. The Maldives Tourism Development Corporation (MTDC), which is a means for locals to invest in the tourism sector and to address the issue of social imbalances, is partly government-owned (45%) and the remaining shares are divided among the population with no more than 0.1% per single person or entity.48 The Government has allocated 15 islands to MTDC for resort development, 9 of which have been identified and already leased to MTDC, while the remaining 6 and the schemes through which they will be handed to the company are yet to be announced. No further information about the number of MTDC-operated resort hotels or the stage of completion of resort developments was available from the authorities. In 2011, the

ecosystems. Oceancare online information. Viewed at: http://www.oceancare.org/en/silentoceans/actions/maldives/?131/Oil-development-off-the-Maldives-19-NGOs-file-Statement-of-Concern.

45 More information on Maldives' GATS commitments may be found, inter alia, in WTO documents GATS/SC/101, 30 August 1995 and WT/TPR/S/110, 13 December 2002.

46 World Travel & Tourism Council (2015); and Ministry of Tourism, Arts and Culture (2013). 47 Maldives Monetary Authority (2015a); and World Bank (2014b). 48 WTO document WT/TPR/S/221/Rev.1, 5 November 2009, and MDTC online information. Viewed at:

http://www.mtdc.com.mv/en/developments/.


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government-owned STO (Sections 3.2.7, 3.4.8, 4.2.2.4, 4.3.2, 4.4.3 and 4.5.3.2) secured 100% ownership of its tourism ventures and in 2012 set up STO Hotels and Resorts Pvt. Ltd. as a separate department of the company. Since 7 February 2012, STO Hotels & Resorts Pvt. Ltd. has also invested in tourism-related activities including the construction of the Fuvahmulah Airport, the Fuvahmulah Airport Emergency Training Programme, the development of B. Muthaafushi Island as a resort, and the Fuvahmulah Airport Lighting Project.49

Table 4.2 Tourism indicators, 2009-15

2009 2010 2011 2012 2013 2014a 2015a Contribution to GDPb (%) 27.3 28.7 28.7 28.4 28.1 27.7 28.1 Growth of tourism GDPc (%) -5.4 15.8 9.2 -0.1 9.0 6.8 8.3 Contribution to total government revenued (%)

.. 26.7 28.0 34.7 35.0 39.8 ..

Contribution to tax revenue (%) 19.5 20.4 15.3 11.7 9.7 7.8 .. Tourist arrivals ('000) 655.9 791.9 931.3 958.0 1,125.2 1,204.9 .. Percentage change -4.0 20.7 17.6 2.9 17.4 7.1 .. Average length of stay (number of days)

7.9 7.6 7.0 6.7 6.3 6.0 ..

Tourism receipts (US$ million) 1,473.0 1,713.0 1,942.3 1,950.6 2,332.7 2,645.2 .. Per bed night (US$) 286.0 246.1 225.6 228.3 208.7 201.8 Bed occupancy rate (%) 70.3 69.5 73.1 70.4 74.0 74.3 .. Bed capacity, resorts/hotels (number of beds)

20,137 23,649 24,493 25,062 26,161 26,914 ..

Percentage change 5.3 17.4 3.6 2.3 4.4 2.9 ..

.. Not available.

a Estimates. b Based on current prices. c Based on constant 2003 prices. d Tourism revenue includes land rent, tourist bed-night tax, tourism goods and services tax, and lease

period extension fee.

Source: Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/statis.php; and data provided by the authorities.

4.45. During the period under review, policy in the sector was governed by two masterplans. The objectives under the Third Tourism Master Plan (2007-2011) were to: facilitate sustainable growth and high-level investment in the industry, while enhancing the public share of economic benefits from tourism; increase employment opportunities and gainful community participation in the industry; develop and maintain supporting infrastructure required for the growth of the industry; ensure environmental sustainability in the development and operation of all tourism products, and strive for global excellence in environmentally-responsible tourism; continue to brand Maldives as a unique destination with innovative products and retain its positioning as a top ranking tourist destination in traditional and emerging source markets; and continue to strengthen the legal and regulatory framework and the institutional capacity of the Ministry of Tourism. The Strategic Action Plan for Tourism under the Fourth Tourism Masterplan 2013-2017 aims at: maintaining Maldives' position in world markets; managing environment and conservation issues; engaging more Maldivians in tourism careers; promoting sensible ways for communities to participate in tourism; promoting investment in sustainable growth and high product quality; and, efficiency in marketing and destination management.50

4.46. The Maldives Tourism Act (Law No. 2/99) remains the main piece of legislation regulating the leasing of islands for tourism purposes. The Act also stipulates the terms and conditions of the lease agreements and is administered by the Ministry of Tourism. During the review period, the Maldives Tourism Act was amended seven times.51 Amendments related, inter alia, to the

49 State Trading Organization (2015). 50 Ministry of Tourism, Arts and Culture (2013). 51 Sixth Amendment to the Maldives Tourism Act 42/2014, 17 December 2014. Viewed at:

https://www.mira.gov.mv/TaxLegislation/Sixth%20Amendment%20to%20the%20Maldives%20Tourism%20Act_English_20141217_English.pdf ); and Seventh Amendment to the Maldives Tourism Act 8/2015, 27 April 2015. Viewed at: https://www.mira.gov.mv/TaxLegislation/Seventh_Amendment_to_the_Maldives_Tourism_Act_English.pdf.


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extension of time of lease and the imposition of fines, the revocation of licences on failure to pay tax, the payment of overdue fees to the Government, and the resumption of taxation.

4.47. Under the Act, islands and land must be leased to the best-qualified bidder through a public tender.52 The only exemption to the process is if the Government of Maldives wishes to invest either on its own or through a joint venture.53 The Government, represented by the Ministry, is the lessor of the resorts and is the owner of all islands developed as tourist resorts. As of 2010, under the second amendment to the Act, lands and islands to be developed as tourist resorts may be leased for a maximum period of 50 years, starting from the date possession of the island is granted to the lessee.54 Under its seventh amendment in April 2015, if the lessee of an island or land for the development of a tourist resort or a party requesting to develop a tourist resort on an island or land fulfils certain ownership-related conditions and is a public company registered in Maldives, the land or island shall be leased for a period of 99 years.55 This change is expected to support further investment in the tourism industry, since longer leases are more attractive to investors because resorts require significant upfront capital expenditure and a longer lease allows investors more time to recoup their initial capital and generate returns on investment.56 Furthermore, in July 2015 Maldives amended its national constitution to allow foreign ownership of land (Sections 2.2 and 2.6).

4.48. Since 2009, about 92 islands or pieces of land have been leased for development. Among these, 16 resorts are operational, while 12 are expected to become operational in 2018. To encourage faster development, the Government maintains incentives such as relief with regard to building completion times, deferment of rent, and deferment of performance bonds.57 These incentives are applicable to all islands and land leased since 2005.

4.49. Tourism and tourism-related activities are estimated to generate over 90% of government tax revenue including import duties and transportation‐related taxes.58 During the review period, tourism tax policy has undergone some changes in an effort to better align taxes with industry realities. Currently, the Government collects six different taxes from tourism and tourism‐related activities: the Tourism Goods and Services Tax (T-GST) (3.5% in 2011, 6% in January 2012, 8% in January 2013, and 12% in November 2014)59; the Bed-Night Tax at US$8 (previously US$6) per accommodation bed per night that was scheduled to cease at the end of 2013 but was extended until 31 December 2014 and replaced by a green tax as of November 2015; the Land Rent Tax at US$8 per square meter of building (changed from rent per bed); the Business Profit Tax of 15%; the 10% Withholding Tax on payments to non‐residents for management fees and technical

52 More information about the leasing conditions and procedures is available in WTO document

WT/TPR/S/221/Rev.1, 5 November 2009. 53 The conditions would be waived to enable the Government to attract potentially large investors in the

tourism or other sectors of the economy. For example, if a foreign airline decided to invest in an airline in Maldives, the island and land could be offered as part of the deal for infrastructure and tourism purposes.

54 Initially, as per the Maldives Tourism Act 2/99, land leases varied from 25 to 50 years, depending on ownership, size of investment, and listing on the Maldives Stock Exchange. Also if the lessee of an island or land leased prior to this second amendment to the Act were to request an extension of the lease period from the Ministry of Tourism, that lease would be extended after payment of a fee. The second amendment also allowed a leaseholder to transfer rights to a second party prior to the development and commencement of operations on any resort or hotel. This was considered as a step towards addressing potential financing constraints between leaseholders and investors. Ministry of Tourism, Arts and Culture (2013); and Ministry of Tourism online information. Viewed at: http://www.tourism.gov.mv/downloads/act/tourism_act_second_ammendment_english.pdf.

55 These conditions are: the development and operation of tourist resorts must form part of the "memorandum of association" of the public company; and, a minimum of 55% of the shares of the public company must be sold to the public. Seventh Amendment to the Maldives Tourism Act 8/2015, 27 April 2015. Viewed at: https://www.mira.gov.mv/TaxLegislation/Seventh_Amendment_to_the_Maldives_Tourism_Act_English.pdf.

56 JLL The Investor online information. Viewed at: http://www.joneslanglasalleblog.com/investor/maldivess-new-99-year-lease-spurs-investors-interest/#sthash.2cMQIiej.dpuf).

57 A performance bond is a surety bond issued by an insurance company or bank to guarantee satisfactory completion of a project by a contractor.

58 Ministry of Tourism, Arts and Culture (2013). 59 A Tourism Goods and Services Tax (T-GST) Act came into effect on 1 January 2011. Under the Act,

T-GST has been charged on the value of goods and services supplied by tourist resorts, tourist hotels, guest houses, picnic islands and tourist vessels, and on certain other services supplied by places providing services to tourists in Maldives.


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services; and the Airport Service Charge at US$25 (US$18 until 2013) on each non‐resident departure (Section 3.4.2.1). During the review period, the tourism sector's share of total government revenue (i.e. land rent, T-GST, bed-night tax, and lease period extension fee) rose steadily from 26.9% (2010) to 39.8% (2014) (Table 4.2).

4.50. Maldives continues to promote environmentally sustainable tourism. Development and operational controls for the tourism sector, particularly for tourist resorts, are primarily defined in the Regulation on the Protection and Conservation of Environment in the Tourism Industry (2006), and the Environmental Impact Assessment (EIA) Regulations (2012).60 The former provides: guidelines for planning, construction and operation of tourist facilities from an environmental and conservation perspective; specific controls for high impact developments through mandatory impact mitigation measures; and, a framework to undertake and submit environmental monitoring throughout the project lifecycle. In line with Clauses 15, 19 and 26 of the Maldives Tourism Act (Law 2/99), a regulation for the submission of the Environment Impact Assessment (EIA), published on 3 August 2015, requires a detailed Environment Impact Assessment (EIA) report by a certified surveyor to be submitted to the Ministry of Tourism prior to any development on the land/island.

4.5.3 Financial sector

4.51. The financial sector in Maldives comprises commercial banks, non-bank financial institutions, and insurance companies. In 2015, the sector's contribution to GDP was 5.1%, down from 6.2% in 2009 (Table 1.2).

4.5.3.1 Banking

4.5.3.1.1 Structure and performance

4.52. The financial sector is dominated by the banking industry, which now has seven banks operating in the country.61 They consist of: the majority (51%) state-owned owned Bank of Maldives; four branches of foreign banks (Habib Bank Limited, State Bank of India, Bank of Ceylon, and Hong Kong Shanghai Banking Corporation); one subsidiary of a foreign bank (Mauritius Commercial Bank); and, as from 7 March 2011, the Maldives Islamic Bank (MIB).62

4.53. In addition to the general insurance market (Section 4.5.3.2), the non‐banking financial institutions market remains unchanged and includes a finance leasing company (the Maldives Finance Leasing Company – MFLC), a specialized housing finance institution (Housing Development Finance Corporation – HDFC), and a money‐transfer business.63 HDFC is partially owned by the Government of Maldives with a stake of 48.9% and the rest is held by the International Finance Corporation (IFC), Asian Development Bank (ADB) and HDFC Investment Pvt. Ltd. (India). MFLC was privatized in 2014 and is 100% locally owned. The HDFC provides financing for the development of residential and commercial real estate, and the MFLC supplies medium-term finance for consumer durables for households and professional services.

4.5.3.1.2 Legislative and institutional framework

4.54. During the review period, there were several developments in the legal framework governing the sector.64 A Maldives Banking Act (Law No. 24/2010) was enacted in 2010 and amended by Law No. 3/2015 (First Amendment) in 2015. The Act regulates licensing; financial,

60 More information about the environmental requirements governing the sector is available in WTO document WT/TPR/S/221/Rev.1, 5 November 2009; and Ministry of Tourism, Arts and Culture (2013).

61 Ministry of Tourism, Arts and Culture (2013). 62 The MIB, the first Islamic bank (based on Islamic Shariah principles) to operate in Maldives, is 85%

owned by the Islamic Corporation for Development of the Private Sector (ICD) and 15% by the Government of Maldives. Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/fi.php?itm=6. At the time of the previous TPR the State Bank of India had a 41% market share; the Bank of Maldives, 43%; Bank of Ceylon, 3.5%; Hong Kong Shanghai Banking Corporation, 9%; the Mauritius Commercial Bank accounted for 1.5% of the market; and, Habib Bank Limited had a 2% share.

63 Ministry of Tourism, Arts and Culture (2013). 64 Maldives Monetary Authority online information. Viewed at:

http://www.mma.gov.mv/laws/bankactenglishnew.pdf, http://www.mma.gov.mv/laws.php#other, http://www.mma.gov.mv/laws.php, and http://www.mma.gov.mv/laws/sezacteng.pdf.


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prudential, and supervisory matters; and conservatorship, liquidation and receivership of banks in Maldives. An Islamic Banking Regulation 2011 now deals with similar matters relating to the Islamic banking business and related supervisory matters. The Special Economic Zones Act (24/2014) now provides, inter alia, for exemptions from the withholding tax, the business profit tax and the GST for a certain period for activities established in these zones (Sections 3.4.2.3 and 4.3.3). A Prevention of Money Laundering and Terrorism Financing Act (10/2014) was enacted to criminalize these activities, provide preventive measures, and establish a Financial Intelligence Unit for receiving, analysing and disseminating financial transaction information. The Financial Intelligence Unit was established in October 2014 and received 14 suspicious transaction reports from financial institutions; information contained in 3 of these reports has been passed to Maldives' Police Service for further investigation. Furthermore, the MMA has issued enforcement regulations relating to the Act to banks, life insurance institutions, money remittance institutions and money changers. On 1 October 2015, the existing regulation on NGOs was amended and a new chapter was added to ensure that they are not used as a means for money laundering activities and for financing terrorism; a standardized way of reporting their funding and conditionality was introduced.

4.55. The Shariah Council is, inter alia, responsible for validating all Islamic banking and finance operations to ensure their compatibility with the Shariah principles, as well as for establishing a framework to harmonize Shariah interpretations in accordance with Islamic law and strengthen the regulatory and supervisory oversight of the Islamic banking and finance industry.65 During the review period, it deliberated on multiple issues including various new product structures, as well as proposals by and authorization to two conventional financial institutions to establish windows to offer Islamic financial products and services. An Islamic debt security (Sukuk) was introduced to the capital market by the HDFC in 2013 for the first time.66 At the same time, the Council endorsed and put into practice a guideline aimed at streamlining and standardizing its approval process. On 22 January 2015, the Bank of Maldives inaugurated its Islamic Banking Window with the launch of its Wadhiah deposit.

4.56. Banks in Maldives are regulated by the Maldives Monetary Authority (MMA) and in addition to the Maldives Banking Act (Law 24/2010) they are subject to 11 prudential regulations issued in 2009 and revised in 2015. Under the Act, all banks (both foreign and domestic) require a licence from the MMA to start banking operations in Maldives. The MMA, which conducts regular supervision of the banks, can order an examination of an institution, and if any bank is found to be financially unsound or acting unlawfully, the MMA prescribes steps to rectify the situation. All commercial banks must have at least Rf 150 million as paid-up capital and maintain a minimum capital adequacy ratio (CAR), the total risk-weighted CAR being 12%. The key requirements related to lending limits stipulate that a bank may not advance credit to any single entity (person or related persons) in excess of 15% of the bank's capital base, or up to 30% in specific low-risk circumstances. In the case of a corporate group, the exposure is limited to 40% of the bank's capital base. Furthermore, an additional 10% of capital base is allowed for infrastructure lending as per the revised prudential regulations of 2015. To facilitate private sector lending and to reduce the cost of borrowing for the commercial banks, the minimum reserve requirement (MRR) for banks was reduced from 25% to 20% (20 February 2014) and 10% (20 August 2015) of the average local and foreign currency deposits, excluding interbank liabilities and L/C margin deposits; banks that fail to meet the MRR are subject to a penalty of 18% per annum on the shortfall amount.67

4.57. Between 2009 and 2014, Maldives' banking sector's capital adequacy ratio rose from 25% to 45%; within virtually the same period the capital to assets ratio grew from 16.4% to 22.8% (3rd quarter 2014).68 According to the IMF, a firmer approach to supervision remains necessary. Banks are broadly in compliance with prudential regulations, though one bank has apparently breached single borrower limits and another the foreign currency exposure limits. Nonetheless, the accuracy of financial soundness indicators deserves close scrutiny. The MMA has resisted pressure to count capital held offshore when calculating compliance with single borrower limits. Standards for financial institutions that may set up in special economic zones (SEZs) should be equivalent to

65 The prohibition of Riba, or interest, is perhaps the most well-known Shariah principle relating to

financial transactions. Maldives Monetary Authority (2014). 66 Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/fs.php. 67 Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/mpolicy.php. 68 IMF (2015).


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those onshore, with similar prudential, supervisory and reporting requirements. The MMA is working to strengthen supervision and regulations are being developed to supplement the legislation on SEZs. On 14 June 2015, the Regulation for offshore banks operating in the SEZs was published and as of end-October 2015 the Financial Sector Development Unit of MMA was working on drafting the prudential regulations for offshore banking.

4.58. According to the authorities, as of July 2015, tourism loans given to private sector and non-financial corporations accounted for 32% of the banking sector's total lending. In the banking sector, in 2014 the main area of concern continued to be credit risk, as indicated by the high level of poor-quality loans, though non-performing loans (NPLs) in the tourism and construction sectors are falling back from high levels built up during the global financial crisis. Between 2009 and 2014, the share of NPLs to total loans peaked in 2012 at 21%, and then declined to 16% in June 2015 as a result of a few large recoveries relating, inter alia, to better performance in the tourism sector.69

4.59. According to the IMF, bank profitability has increased.70 Between 2009 (January) and 2015 (May), Maldives' banks' interest spread (difference between average borrowing and lending rates in nominal terms) oscillated around 6.7 percentage points (Chart 4.1). Changes in the spread are an indicator of profitability as the spread is where a bank makes its money.71

Chart 4.1 Interest rate spread (%), January 2009 to May 2015

0

2

4

6

8

10

12

14

Lending rate

Deposit rate

Interest spread

Source: IMF online information, "International Financial Statistics".

4.5.3.2 Insurance

4.60. During the review period, the insurance sector remained unchanged with no new entries in the market. It comprises three insurers: the Allied Insurance Company, owned by the STO since 1985 (Sections 3.2.7, 4.2.2.4, 4.3.2, 4.4.3 and 4.5.2); the Ceylinco Insurance Company Pvt. Ltd.; and Amana Takaful (Maldives) Pvt. Ltd.; with only one (Allied) offering life insurance, although more are expected to develop.72 Currently there are 27 insurance agents and 6 insurance brokers. The Guideline for the Administration of Insurance Agents 2010 allows agents to only represent

69 IMF (2015); and Maldives Monetary Authority (2015a). 70 IMF (2015); and Maldives Monetary Authority (2015a). 71 Moneyterms online information. Viewed at: http://moneyterms.co.uk/interest-spread/. 72 Prior to 2010, Amana Takaful and Ceylinco Insurance were operating in the local market as agents of

foreign insurers, while Sri Lanka Insurance Corporation, which left the market in 2011, operated as a branch. All the insurance service providers in Maldives were incorporated (i.e. turned from branch of a foreign firm into a locally registered company) on 4 March 2010. Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/fi.php?itm=14 and http://www.mma.gov.mv/fs.php.


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locally licensed insurers. Similarly, the Guidelines for Insurance Brokers 2011 allow brokers to only solicit policies from locally licensed insurers. Nevertheless, it seems that the volume of the Maldivian insurance industry remains low and lags behind other South Asian markets.73 The market seems far from being saturated and there is potential for further development.74 The growth of Shariah compliant insurance (Takaful insurance), and the introduction of mandatory third-party motor vehicle liability insurance in 2012, were among the sources of the industry's growth.75 Tourism is to become a source of growth for the insurance sector with new insurance products created in partnership with the Government and other key stakeholders. Strong competition is expected in tourism-aligned insurance products such as travel and diving insurance. As a result, as of 2014 the Allied Insurance Company introduced, inter alia, an Islamic Takaful Window (Ayady Takaful), a Select Gold Health Insurance Plan, and an Inbound Travel Insurance Plan targeting tourists visiting the country.76 Fire insurance continues to be the single largest class of insurance business, accounting for 37% of the total premium, while marine insurance accounted for 18% of the total premium in 2014.77

4.61. Minor changes were made to the legal framework governing the insurance industry including the Guideline on Application Fees for Insurance Businesses 2010, the Guideline on Annual Fees for Insurance Businesses 2010, the Guideline on Prudential Requirements for Insurance Undertakings 2010, and the Guideline for the Administration of Insurance Agents 2010.78 Additionally a Guideline on Fit and Proper Criteria for Insurance Undertakings regarding the suitability of major shareholders, directors, chief executive officers, actuaries, or any person who participates in policy making functions or is responsible for any material portion of the insurance business came into effect on 1 October 2013. Insurance companies remained subject to the Insurance Industry Regulations, which were extended until 30 April 2014 and are administered by the Maldives Monetary Authority (MMA), the main regulatory body and the licensing authority. Under the 18 August 2015 amendment to the Maldives Monetary Authority Act, supervision and regulation of insurance was included in the Act and consequently the Insurance Industry Regulations were given permanent status under the Act. Authorized insurers are required to submit detailed quarterly accounts to the MMA. The minimum paid-up capital requirement for insurers was amended by the Guideline on Prudential Requirements for Insurance Undertakings 2010; it was increased from Rf 250,000 for non-life insurers and Rf 350,000 for life insurers to Rf 10,000,000 for both types of insurance business (life or general insurance).

4.62. With assistance from the World Bank's Fostering Innovation through Research, Science and Technology (FIRST) initiative, the MMA initiated a project to establish a supervisory regime for the insurance sector, including the drafting of an Insurance Act (still in progress at end-October 2015), other subsidiary regulations and standard templates and procedure for collecting reporting returns.79 In 2013, a Memorandum of Understanding on Insurance Sector Regulation was signed between the MMA and the Insurance Board of Sri Lanka (IBSL) with regard to cooperation in the field of supervision and regulation of insurance companies and insurance intermediaries, including companies seeking registration as insurers and insurance intermediaries.80

4.5.4 Telecommunications

4.63. The telecommunications sector continues to play a key role in linking the different island and resort communities; all inhabited and some uninhabited islands have access to telephone

73 BusinessWire online information, "Research and Markets: The Insurance Industry in the Maldives, Key Trends and Opportunities to 2017", 15 July 2013. Viewed at: http://www.businesswire.com/news/home/20130715005492/en/Research-Markets-Insurance-Industry-Maldives-Key-Trends.

74 Commonwealth of Nations online information. Viewed at: http://www.commonwealthofnations.org/sectors-maldives/business/insurance_and_reinsurance/.

75 Takaful, an Islamic insurance concept observing the rules and regulations of Islamic law, is a cooperative system of reimbursement or repayment in case of loss, paid to people and companies concerned about hazards, compensated out of a fund to which they agree to donate small regular contributions managed on their behalf by a Takaful Operator. Takaful insurance was introduced into the market by Amana Takaful company. Allied insurance was granted permission to operate a Takaful window in 2013. Maldives Monetary Authority (2014).

76 State Trading Organization (2015). 77 Maldives Monetary Authority (2014). 78 Maldives Monetary Authority (2014). 79 Maldives Monetary Authority online information. Viewed at: http://www.mma.gov.mv/fs.php. 80 Maldives Monetary Authority (2014).


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services. Following a peak of 7% in 2010, the contribution of the telecommunications sector to GDP dropped to 5.2% in 2014 (Table 1.2). Between 2010 and 2014, the number of fixed telephone lines was reduced by 24.3% to 21,478 with teledensity declining from 8.9% (2010) to 6.3% (December 2014), whereas mobile phone subscribers rose by 34.7% to 665,818 and mobile teledensity rose from 154.6% to 194.8% (December 2014).81 Although mobile subscribers are still increasing, albeit at a slower pace, as from 2013 mobile subscriber growth has been "flattening out" and the market's attention shifting to new generation offerings of more advanced services (3G and 4G services).82 At the same time, broadband subscriptions grew more than fivefold to 191,935. In 2013, Maldives ranked 85th out of 166 countries (82nd in 2012) in the ITU's information and communication technology (ICT) index and 60th in the ICT price basket.83

4.64. State involvement in telecommunications has been somewhat reduced in recent years. Fixed-line (including national and international long-distance) and internet services continue to be provided by the no longer majority state-owned Dhivehi Raajjeyge Gulhun Pvt. Ltd. (Dhiraagu); its monopoly for the provision of fixed-line services expired at the end of 2008, but no new provider has entered the fixed-line market as the current industry trend consists of moving towards mobile and broadband services. Dhiraagu's shareholding was opened to public investment in late 2011 when an IPO saw the Government sell off some of its stake, and Bahrain's Batelco acquired the whole of C&W Communications' stake and more in Dhiraagu during 2013.84 The current shareholding of Dhiraagu stands at Batelco 52%, Government of Maldives 41.8% and the public 6.2%. The mobile sector continues to have two providers, Dhiraagu and Ooredoo (called Wataniya Telecom until 2013), a foreign-owned private company; by the end of 2014 the latter, licensed to provide mobile services in 2005, had around 40% of the market. Focus Infocom Pvt. Ltd., a private company, and Dhiraagu continued to operate as the two internet service providers (ISPs) until July 2015 when Ooredoo Maldives was licensed as the third ISP of the market. With the internet market predominantly being controlled by Dhiraagu, this opening is expected to bring a healthier level of competition conducive to bringing down prices and enhancing the quality of services.85 Unlike the fixed broadband market, the mobile broadband market is more evenly shared between Dhiraagu and Ooredoo Maldives with the latter having a 52.4% market share.

4.65. At the time of Maldives' previous TPR, it was indicated that despite a significant decline, telecommunications rates remained relatively high presumably due to the lack of sufficient competition in the sector, as Dhiraagu was the dominant player in the market.86 Mobile rates were slightly higher than in other regional countries like India; however, international call rates were lower than in India and Sri Lanka. According to the authorities, since the introduction of market liberalization of both fixed, internet and mobile services in 2003 and 2005 respectively, telecom tariffs have dropped rapidly. Mobile services including mobile broadband services are said to be now available at comparable rates to similar service providers in the region. No time series of such data was available from the authorities.

4.66. The Telecommunications Policy 2006-2010 aimed to, inter alia: ensure that telecommunications charges are non-discriminatory, affordable and cost oriented; improve the telecommunications infrastructure to provide basic, enhanced, and broadband services throughout the country; ensure autonomy of the Regulatory Authority by law with clearly defined powers and resources to effectively carry out its duties to protect consumer and operator interests; and increase competition. In this regard, the "one service one tariff" regime, whereby mobile phone

81 Communications Authority of Maldives online data. Viewed at:

http://www.cam.gov.mv/Statistics_2010_to_2014.htm and http://www.cam.gov.mv/Statistics_monthly2014.htm.

82 Budde online report/information. Viewed at: http://www.budde.com.au/Research/Maldives-Telecoms-Mobile-and-Broadband.html.

83 International Telecommunication Union (2014). 84 Dhiraagu was a joint-venture between the Government (55%) and Cable and Wireless (45%) until

2011. WTO document WT/TPR/S/221/Rev.1, 5 November 2009 and Budde online report/information. Viewed at: http://www.budde.com.au/Research/Maldives-Telecoms-Mobile-and-Broadband.html.

85 Focus Infocom with majority shareholding (80.76%) by Platinum Capital Holiday (PCH) and minority shares distributed among various local individuals and companies, has 23.7% of the fixed broadband market share (December 2014) while Dhiraagu has the rest.

86 Regulations on pricing and market dominance apply to Dhiraagu in sectors where it is the dominant player in the market.


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calls between any two points in Maldives would cost the same, was implemented and is now in place (see below).87

4.67. A National Broadband Policy 2014-2018 was issued in February 2014.88 In addition to specifying an 18-month timeline for universal broadband access, extending broadband Internet access to all the inhabited islands of the country, the Policy requires ISPs to offer a "Basic Broadband Package" which gives speeds and usage allowances sufficient for the typical needs of the average person, at a price that does not exceed 4% of the GDP per capita. Furthermore, the Communication Authority of Maldives (see below) will specify minimum service quality standards for the Internet service offered by ISPs and monitor the actual service levels to ensure that they are being met. It also calls for 100 Mbps high speed broadband services to be available at all commercial and industrial centres of the country.

4.68. The 2003 Maldives Telecommunications Regulation, as amended in 2008 to include the regulation of postal services and information technology, remains unchanged.89 It is the legal instrument for the telecom industry and it is to remain in force until a Telecommunication Bill is passed. A Telecommunications Bill was submitted to Parliament in July 2015 and was expected to come into effect before the end of the year. The Communications Authority of Maldives (CAM) remains in charge of, inter alia, developing a fair and competitive telecommunications industry, issuing and administering telecommunications licences, approving all new service changes and any price changes, and, reviewing the Telecommunications Regulations every five years.

4.69. Mobile number portability, or the ability for mobile phone users to change their mobile service provider without changing their mobile phone number, was to be introduced in Maldives before the end of 2015; it is expected to make the mobile market even more competitive, leading to increased quality of service and more choice for customers.90 A 6% goods and services tax (GST) tax for telecommunication services was introduced as of 1 May 2014.91

4.70. Despite the lack of a universal access policy per se, Dhiraagu is obliged to provide universal access to telephone services in Maldives' 200 inhabited islands through the installation of at least two payphones on each of these islands.92 The Government does not maintain a specific universal access fund to support the advancement of universal access goals, but requires operators to provide mobile services and dial-up Internet connection at reduced rates for educational and healthcare activities.

4.5.5 Transport

4.71. During the review period, the transport sector's contribution to GDP oscillated around 7.3% (Table 1.2). Maldives' geography – while a central attribute for the tourism industry – imposes high costs and challenges in terms of public service provision, including in transportation.93 Due to the nature of Maldives' geography, maritime transport services are the most widely used mode of

87 At the time of the previous TPR a basic telecommunication package was to be available to all

inhabited islands by the end of 2008. The package was to include 90 minutes of national voice calls and 250 MB of internet access at a minimum speed of 56 Kbps, to be available on request at no more than Rf 200 per month. No further information on this package was available from the authorities in this respect at end-October 2015.

88 Ministry of Transport and Communication press release, "All Inhabited Islands in the Maldives Will Have Access to Broadband Internet within 18 Months - Minister Ameen", 24 February 2014. Viewed at: http://motc.gov.mv/index.php/en/press-office/news-release/item/87-all-inhabited-islands-in-the-maldives-will-have-access-to-broadband-internet-within-18-months-minister-ameen and http://www.cam.gov.mv/docs/policy/National_Broadband_Policy2014_2018.pdf.

89 More information about the legal and institutional framework governing the sector is available in WTO document WT/TPR/S/221/Rev.1, 5 November 2009.

90 Ministry of Transport and Communication press release, "Mobile Number Portability to be introduced by August 2015", 24 February 2014. Viewed at: http://motc.gov.mv/index.php/en/press-office/news-release/item/89-mobile-number-portability-to-be-introduced-by-august-2015.

91 Online Dhiraagu announcement, "GST will be charged on all Telecommunication Services from 1st May 2014", 22 April 2014. Viewed at: https://www.dhiraagu.com.mv/GST_will_be_charged_on_all_Telecommunication_Services_from_1St_May_2014.aspx; and World Bank (2014b).

92 International Telecommunication Union News, "Maldives - Moving up the development ladder", July/August 2011. Viewed at: https://www.itu.int/net/itunews/issues/2011/06/22.aspx.

93 IMF (2015).


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transport, followed by air transport services. According to the World Bank's Logistics Performance Index 2012, Maldives ranked 93rd in the quality of trade and transport related infrastructure, 117th in the ease of arranging competitively priced shipments, 81st in competence and quality of logistics services, and 102nd in the frequency with which shipments reach the consignee within the expected delivery time out of 155 countries and behind other peers in South Asia, like India, Pakistan, and Sri Lanka.94

4.72. Maldives is considering ways to develop regional hubs and improve transport connectivity to, inter alia, encourage voluntary resettlement.95 This would enable higher quality service provision at lower cost in interdependent key areas such as education. The Government is also planning two large infrastructure projects, i.e. airport expansion and a road bridge between Male and the airport, financed by official bilateral loans. To address environmental challenges from tourism and infrastructure development, the United Nations is encouraging the development of a comprehensive long-term national climate change adaptation strategy which could help mobilize grants and concessional loans.

4.73. Following institutional restructuring in 2014, the Ministry of Economic Development (MED) is now in charge of matters relating to maritime, land and sea transportation, whereas the Civil Aviation Authority (CAA) under the Ministry of Tourism has been in charge of regulation pertaining to aviation since 2012; prior to 2014 the Ministry of Transport and Communication was in charge of matters relating to transport and communication. The Transport Authority of Maldives (under the Ministry of Economic Development) regulates and promotes the development of maritime and land transport. It also sets policies to mitigate the negative impact of transport on the environment, sets vessel and vehicle safety standards, and implements land and maritime regulations. The Authority provides, inter alia, registration services for vehicles and vessels, and roadworthiness and vessel safety certificates, and promotes and issues certification for Maldivian Seamen.

4.74. Under Section 16 of the Business Profit Tax Act (Law No. 10/2011), as from 2010, a non-resident owner or charterer of a ship or aircraft may be exempt from the tax if the Commissioner General is satisfied that reciprocal treatment for business profit tax or any other similar tax is granted by the taxpayer's country of residence to a Maldivian-resident taxpayer.96 The authorities indicated that this practice is in line with the international best practice of taxing airlines and shipping companies only by their country of residence.

4.5.5.1 Maritime transport

4.75. As of January 2014, ten cargo vessels with a capacity of 50,000 dead-weight tons were registered at Maldives; half of this tonnage was locally owned.97 As of May 2014, Maldives' container-ship fleet was operated by 3 companies and consisted of 5 vessels with a total carrying capacity of 12,871 TEUs (twenty-foot equivalent unit).

4.76. According to the National Development Plan 2006-2010, the holistic development of Maldives requires an efficient maritime domestic transport network.98 The authorities focused on building harbours and access points in all the islands in the country. Each year, government funds are allocated for upgrade and renovation of the harbour. Public sector investment projects include harbour development to facilitate transportation access.

4.77. Inter-island services remain deregulated and prices determined by prevailing conditions; nevertheless, in an effort to promote these services, as from 2008 the MED has signed a number of agreements with operators that regulate prices and provide subsidies to cover costs. Although a number of ferries are operated by island communities, private parties and the majority state-owned Maldives Transport and Contracting Company (MTCC), which represents one third of the market, the scheduled ferry services network is very limited. Foreign-flag vessels cannot provide passenger and cargo transport activities. Most of the inter-island cargo and passenger

94 World Bank (2014b). 95 IMF (2015). 96 Maldives Inland Revenue Authority online information. Viewed at:

https://www.mira.gov.mv/Tax_Treaties.aspx. 97 UNCTAD (2014). 98 Maimoona Aboobakuru (2014).


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traffic is carried by traditional boats (dhonis) of various sizes. Tourism resorts operate their own services using a variety of boats to transport guests. The Foreign Tourist Vessel Regulation 2008, last amended in 2010, requires the appointment of an agent in Maldives authorized by the Maldives Customs Service; permits and authorizations from all relevant government authorities for such a vessel to enter and harbour in domestic waters are issued for a maximum period of 90 (ninety) days from the day the vessel has been provided with inward clearance.99

4.78. No new port facilities have been put into operation since 2009. Maldives has three international sea ports: Male Commercial Harbour (MCH), and two regional harbours, Khulhudhuffushi (North), and Hithdhoo (South). Between 2009 and 2012, the number of ships handled increased by 38.8% to 580 per year, and the number of containers handled by 24.7% to 54,820 twenty-foot equivalent units (TEUs).100 At the time of the previous TPR, space limitations made MCH very congested, causing average harbour times of 7 days for front-loading vessels and 17 days for side-loading vessels. Consequently, costs at MCH were relatively high. The absence of container-handling cranes (ship-to-shore) and a yard management system (RTG/tractor-trailer system) also added to costs. According to World Bank data, the cost and time to import or export a container was 22 days and US$1,610 and 21 days and US$1,625 respectively in 2014, two times more expensive than Sri Lanka.101 According to the authorities, the vessel service time was in the same year 2.23 days and stevedoring charges for a TEU stood at US$195.50 (laden); charges, last set in 2012, differ depending on whether the container is empty or laden.102

4.79. The wholly state-owned Maldives Ports Limited continues to operate all international ports.103 Since 2008, all ports have been regulated by the Transport Authority of Maldives.

4.5.5.2 Air transport

4.80. The air transport sector remains regulated under the Civil Aviation Act 2001. The Act specifies conditions for, inter alia: air operators' licences; crew and pilot registration; air worthiness; registration of aerodromes; and safety inspections and procedures. Relevant rules and regulations must be at least at the level stated in the Annexes to the Convention on International Civil Aviation and the authorities indicated that at present they comply with all of its annexes.104 The rules allow the Civil Aviation Authority to conduct financial surveillance of existing carriers if there are signs of service deterioration. As of 1 July 2014, the Airport Service Charge was increased by 38.9% to US$25 on each non‐resident departure (Section 4.5.2).105

4.81. A Civil Aviation Authority (CAA), established in 2012 to replace the Civil Aviation Department (CAD) in the then Ministry of Tourism, Arts and Culture, aims to develop and administer policies and regulations to ensure safe, secure, orderly and economic development of aviation in Maldives.106 The main tasks of CAA are setting up national safety standards that are compliant with international standards; and economic and safety regulation through regulation of airports, air traffic services and airlines.

4.82. During the review period, the supply of international airline services was strengthened. The Maldivian airline company, which is owned and operated by the wholly government-owned entity Island Aviation Services (see below), increased its overseas services.107 Two other companies, Villa Air (since October 2011) and Mega Maldives (since 2010), a joint venture with private investors

99 Foreign Tourist Vessel Regulation – June 2010. Viewed at:

http://www.tourism.gov.mv/downloads/vessel_regulations/Foreign_Vessel_Regulation_eng.pdf. 100 Maldives Ports Limited online data. Viewed at: http://www.port.com.mv/port-statistics/. 101 World Bank (2014a). 102 Maldives Ports Limited, "MPL Tariff". Viewed at: http://port.com.mv/wp-

content/uploads/2012/02/Web-Revised-tarifff-2012-1.pdf. 103 Maldives Ports Limited online information. Viewed at: http://www.port.com.mv/. 104 WTO document WT/TPR/S/221/Rev.1, 5 November 2009. 105 Eleventh Amendment to the Airport Service Charge Act 15/2014, 5 May 2014. Viewed at:

https://www.mira.gov.mv/TaxLegislation/Eleventh%20Amendment%20to%20the%20Airport%20Service%20Charge%20Act%20(English).pdf.

106 Act No. 02/2012, 11 January 2012. Maldives Civil Aviation Authority online information. Viewed at: http://www.aviainfo.gov.mv/.

107 In addition to daily flights to Trivandrum, Maldivian expanded its destinations to: Chennai, India and Dhaka, Bangladesh (2012); Chongqing, China (2013); Wuhan, China (2014) and Xi'an, Nanjing and Changsha, China (2015). Maldivian online information. Viewed at: http://maldivian.aero/corporate/about-maldivian.html.


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from the United States, entered the market; they now operate to selected locations in the country as well as a few international destinations.108 Foreign airlines operate scheduled services to Male's Ibrahim Nasir International Airport (INIA).109 The international connectivity increased rapidly during the review period. At the end of 2014, 34 airlines from 17 countries (31 scheduled and 3 charter airlines) connected Maldives directly to 23 countries.

4.83. Similar to international routes, the domestic air transport market grew significantly. Between 2009 (September) and 2014 the number of passengers and weight of cargo carried on domestic routes increased by 107.4% and 64% respectively. Island Aviation Services, Trans Maldivian Airways (a private firm), and Flyme (operated by Villa Air as from 1 October 2011) provide domestic air services between the islands. Trans Maldivian Airways, which in 2013 merged with Maldivian Air Taxi (PTE) Ltd. (MAT) – one of the largest seaplane operators in the world, solely operates seaplanes to transfer passengers to resorts while Island Aviation Services operates both wheel-based aircrafts and seaplanes.110 A lower GST rate of 6% has benefited the domestic air transport of locals since 2014 (Section 3.4.2.1).

4.84. Maldives maintains an open skies policy in both the international and domestic aviation market (see below). There are no restrictions on foreign investment or entry into the market; however, there are cabotage restrictions, i.e. no foreign operators can service domestic routes.

4.85. During the review period, Maldives' airport capacity increased considerably. At present, Maldives has eleven airports compared to five at the time of the previous TPR; four (Ibrahim Nasir International Airport/Male, Gan, Hanimaadhoo, Maamigili/Villa) serve international routes and seven are for domestic flights only.111 Airports in Maldives receive navigational services from the state-owned Maldives Airports Corporation Ltd. (MACL) which operates the Ibrahim Nasir International Airport. MACL is also a partner in the recently incorporated joint venture company Gan International Airport Pvt. Ltd. (GIA) in which it has an equal share with other state-owned partners, namely the STO and Gan Airport Company Limited (GACL) operating the Gan International Airport (Section 4.2.2.4).112 To promote tourism and other economic activity in the southern part of the country, a joint venture, the Addu International Airport Pvt. Ltd. (AIA), was formed between GACL, MACL and the STO in early 2012 to further develop and expand the Gan International Airport. Regional airports are overseen by the Ministry of Tourism, and managed and operated by either the Ministry's Department of Regional Airports (2) or private companies (5 leased); on the other hand, MACL provided aviation fuel services and airport firefighting and rescue services to all regional airports developed and owned by the Government, as well as Gan International Airport, until 25 February 2011 as from when the STO was entrusted with the supply of fuel services and the operating entities with the firefighting and rescue services. As of 2014, there were plans to develop and operate four new domestic airports (Haa Alifu Huvahandhoo, Alifu Alifu Mathiveri, Faafu Magoodhoo, and Meemu Muli) as well as to expand the Hanimaadhoo International Airport under a public-private partnership (PPP) model including several incentives.113 At end-October 2015, the development of three airports (N. Maafaru, Gdh. Maavarulu, Dh. Kudahuvadhoo) was ongoing, and projects for another three (Alifu Alifu Mathiveri, Faafu Magoodhoo, Meemu Muli) were opened for bid.

4.86. Maldives, a signatory to the Montreal Convention for the Unification of Certain Rules for International Carriage by Air, was audited under the International Civil Aviation Organization's (ICAO) universal Security Audit Programme in 2010 and 2014 and found to be below global

108 Maimoona Aboobakuru (2014). 109 In 2015, INIA was to complete construction of a new apron on the northern side to accommodate for

the increase in domestic operations and overlay of the existing runway started in August 2015. Commencement of a parallel runway was anticipated to start by the end of 2015. A project for new terminal expansion by 2018 is under way.

110 In 2013, the United States equity fund Blackstone Group announced that they were acquiring both MAT and rival company Trans Maldivian Airways (TMA). A merger was brought underway and a new company was founded, retaining the Trans Maldivian Airways name, and the colours of MAT.

111 The domestic airports are: Dharavandhoo, Fuvahmulah, Ifuru, Kaadedhdhoo, Kadhdhoo, Kooddoo, and Thimarafushi.

112 Maldives Airports Corporation online information. Viewed at: http://www.macl.aero/plus/S_CORPORATE/28/5.

113 The developer will develop and operate the airport for a period of 25 years, and will be eligible to acquire one or two virgin islands, free of acquisition cost, to develop tourist resorts for a lease period of 50 years. In addition, import duty exemption and concessional land lease rates on the airport will be available. Investors may propose alternatives. Ministry of Transport and Communication (2014).


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standards in areas such as legislation, accident investigation, and air navigation services.114 A bill on passenger protection was submitted to Parliament but was returned to the CAA, and as of end-October 2015 a passenger rights bill to implement ICAO core principles on consumer protection in both the international and domestic air transport sectors was being drafted. Maldives maintains 29 air service agreements (ASAs) (Table A4.1), and 15 interim air service agreements (MOUs); during the review period it signed an ASA with Hong Kong, China (in 2009); Bhutan (in 2011); and Mauritius (in 2013) as well as MOUs with Oman (in 2009), Belgium (in 2010), and Turkey (in 2011).115 Plans for negotiating ASAs with Japan and Spain were under way.

114 ICAO online information. Viewed at: http://www.icao.int/safety/pages/usoap-results.aspx. 115 Online information on the status of bilateral air services agreements/MOUs. Viewed at:

http://www.aviainfo.gov.mv/downloads/transport/air_services_agreements.pdf.


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5 APPENDIX TABLES

Table A1.1 Merchandise domestic exports by product group, 2009-14

(US$ million and %) 2009 2010 2011 2012 2013 2014 Total domestic exports (US$ million) 76.7 74.2 83.3 161.6 166.5 144.8 (% of total) Total primary products 100.0 99.9 99.9 99.9 100.0 99.8 Agriculture 97.7 96.2 96.8 98.2 98.4 97.7 Food 97.7 96.2 96.8 98.2 98.4 97.7 03 Fish (not marine mammals), crustaceans, molluscs and aquatic invertebrates, and preparations thereof

96.4 95.1 96.2 97.8 97.9 97.4

0342 Fish, frozen (excluding fillets and minced fish) 31.6 34.6 26.4 32.0 43.2 34.3 0341 Fish, fresh, chilled, whole 11.9 12.4 22.0 24.3 19.5 25.5 0345 Fish fillets and fish meat, fresh or chilled; fish meat frozen

27.1 21.7 28.0 25.1 18.9 20.2

0371 Fish, prepared, preserved, n.e.s. 9.9 7.8 8.4 8.5 9.9 10.9 0351 Fish, dried, salted 15.0 17.6 10.4 6.0 5.0 4.6 0344 Fish fillets, frozen 0.4 0.1 0.0 1.4 1.0 1.0 0355 Flours, meals, etc. of fish, for human consumption

0.0 0.0 0.0 0.0 0.1 0.3

0814 Flours etc. of meat, fish, etc., unfit for human consumption

1.2 1.1 0.6 0.4 0.4 0.3

0363 Molluscs, and aquatic invertebrates 0.4 0.8 0.9 0.4 0.4 0.2 0353 Fish, smoked 0.0 0.1 0.0 0.0 0.0 0.2 Mining 2.3 3.8 3.1 1.7 1.6 2.1 Ores and other minerals 2.3 3.8 3.1 1.7 1.5 2.0 2822 Waste and scrap of alloy steel 1.6 2.7 1.6 1.2 1.0 1.1 2882 Other non-ferrous base metal waste and scrap, n.e.s.

0.6 1.1 1.5 0.5 0.5 0.9

Non-ferrous metals 0.0 0.0 0.0 0.0 0.0 0.0 Fuels 0.1 0.0 0.0 0.0 0.0 0.0 Manufactures 0.0 0.1 0.1 0.1 0.0 0.2

Source: UNSD, Comtrade database (SITC Rev.3).


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Table A1.2 Merchandise imports by product group, 2009-14

(US$ million and %) 2009 2010 2011 2012 2013 2014 Total imports (US$ million) 966.1 1,095.1 1,411.7 1,554.5 1,733.3 1,992.7 (% of total) Total primary products 47.2 49.8 49.5 56.6 55.1 53.7 Agriculture 24.3 24.6 22.6 23.2 24.3 22.9 Food 22.2 22.4 21.0 21.2 22.5 21.0 0545 Other fresh or chilled vegetables 1.7 1.8 1.5 1.5 1.6 1.4 1110 Non-alcoholic beverage, n.e.s. 0.7 0.6 1.0 1.1 1.1 1.2 0222 Milk concentrated or sweetened 1.2 1.2 1.3 1.1 1.2 1.1 0123 Poultry, meat and offal 0.7 0.8 0.9 0.9 1.4 1.1 0579 Fruit, fresh, dried, n.e.s. 1.1 1.2 1.0 1.1 1.1 1.1 0423 Rice, milled, semi-milled 1.4 1.2 1.1 1.0 1.0 0.9 1222 Cigarettes containing tobacco 0.9 0.9 0.9 0.8 0.8 0.8 Agricultural raw material 2.1 2.2 1.6 2.0 1.8 1.8 2484 Wood of non-coniferous, sawn of a thickness > 6 mm

1.2 1.3 0.9 1.1 1.1 0.9

Mining 22.9 25.3 26.9 33.4 30.8 30.9 Ores and other minerals 2.0 2.0 1.8 1.8 1.6 2.0 Non-ferrous metals 0.3 0.2 0.2 0.2 0.2 0.2 Fuels 20.7 23.1 24.9 31.3 29.1 28.7 334 Petroleum oils and oils obtained from bituminous minerals (other than crude)

17.9 19.8 21.8 28.1 25.7 25.1

3442 Gaseous hydrocarbons, liquefied, n.e.s.

2.0 2.2 2.3 2.5 2.6 2.8

Manufactures 52.8 50.2 50.5 43.3 44.9 46.3 Iron and steel 2.1 2.1 2.1 2.2 1.4 1.7 Chemicals 6.0 6.0 5.5 5.7 5.2 6.0 5429 Medicaments, n.e.s. 0.8 0.7 0.6 0.7 0.6 0.7 Other semi-manufactures 9.0 8.8 8.9 8.3 7.7 7.7 6612 Portland cement and similar hydraulic cements

1.3 1.2 0.9 1.0 0.9 0.9

6353 Builders joinery/carpentry wood 0.6 0.7 0.8 0.5 0.6 0.8 Machinery and transport equipment 23.9 22.6 23.6 17.1 20.2 21.4 Power generating machines 1.1 0.9 1.0 0.7 0.9 1.1 Other non-electrical machinery 5.9 5.6 5.1 4.5 4.5 5.5 7415 Air conditioning machines, and parts

0.8 0.8 0.7 0.6 0.6 0.8

Agricultural machinery and tractors 0.0 0.0 0.0 0.0 0.0 0.1 Office machines & telecommunication

equipment 6.6 6.5 5.8 4.4 5.4 4.7

7643 Radio or television transmission apparatus

1.5 1.6 1.0 0.8 1.0 0.9

Other electrical machines 3.5 3.6 4.1 2.9 2.8 3.2 7731 Insulated wire, cable etc.; optical fibre cables

0.9 0.8 1.3 0.7 0.6 0.9

Automotive products 1.0 0.6 1.3 0.7 0.7 1.0 Other transport equipment 5.8 5.5 6.3 3.9 6.0 6.0 7924 Aeroplanes, etc. (excl. helicopters), > 15,000 kg unladen

0.3 0.3 0.2 0.6 2.3 1.5

7929 Parts, n.e.s., (excl. tyres, engines, electrical parts) of 792

1.0 0.9 1.1 1.0 0.9 1.1

7931 Yachts and other pleasure/sports/vessels

0.5 0.1 0.4 0.1 0.2 0.8

Textiles 1.6 1.5 1.3 1.3 1.4 1.3 Clothing 1.3 1.3 1.1 1.3 1.4 1.2 Other consumer goods 8.9 7.9 8.0 7.3 7.6 6.9 8215 Furniture, n.e.s., of wood 1.0 0.9 0.9 0.8 0.9 0.9 Other 0.0 0.0 0.0 0.1 0.0 0.0

Source: UNSD, Comtrade database (SITC Rev.3).


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Table A1.3 Merchandise domestic exports by destination, 2009-14

(US$ million and %) 2009 2010 2011 2012 2013 2014 Domestic exports (US$ million) 76.7 74.2 83.3 161.6 166.5 144.8 (% of total) America 0.8 0.7 0.8 3.8 4.8 9.4 United States 0.8 0.7 0.8 3.1 4.4 9.0 Other America 0.0 0.0 0.0 0.7 0.5 0.3 Canada 0.0 0.0 0.0 0.2 0.1 0.3 Europe 43.0 35.5 49.5 45.4 37.9 39.5 EU-28 42.5 34.4 49.0 44.7 36.6 37.0 France 11.2 10.9 17.7 16.5 13.5 14.5 Germany 3.5 2.8 2.5 3.4 6.0 6.7 Ireland 0.0 0.0 4.1 4.4 3.6 5.8 United Kingdom 10.0 9.5 8.2 7.4 5.5 4.7 Italy 12.8 9.3 10.5 7.7 5.0 3.5 Spain 2.1 0.8 2.6 2.3 1.3 1.1 The Netherlands 2.3 0.5 2.8 2.5 1.6 0.7 EFTA 0.5 1.1 0.4 0.7 1.3 2.5 Switzerland 0.5 1.1 0.4 0.7 1.3 2.5 Other Europe 0.0 0.0 0.0 0.0 0.0 0.0 Commonwealth of Independent States (CIS)

0.0 0.0 0.0 0.0 0.1 0.4

Russian Federation 0.0 0.0 0.0 0.0 0.1 0.4 Africa 2.5 0.5 0.2 0.0 0.0 0.0 Middle East 5.9 3.1 2.2 3.4 6.9 1.1 United Arab Emirates 0.0 0.1 0.2 0.3 0.4 0.5 Iran, Islamic Rep. of 5.9 3.0 2.0 3.1 6.5 0.5 Iraq 0.0 0.0 0.0 0.0 0.0 0.1 Asia 47.9 60.2 47.3 47.4 50.3 49.6 China 0.0 0.4 0.0 2.4 0.1 0.1 Japan 4.0 1.7 3.1 2.1 3.1 5.3 Six East Asian Traders 24.6 35.1 30.1 33.4 39.5 35.9 Thailand 20.7 29.9 20.3 27.4 37.0 32.2 Hong Kong, China 1.1 1.4 0.8 1.5 1.0 1.5 Chinese Taipei 2.5 3.2 7.3 1.6 1.2 1.5 Korea, Rep. of 0.0 0.0 0.6 2.6 0.1 0.5 Other Asia 19.4 23.0 14.2 9.5 7.6 8.4 Sri Lanka 17.1 19.6 11.7 7.2 5.7 6.0 India 2.3 3.4 2.1 1.8 1.5 2.0 Australia 0.0 0.0 0.0 0.5 0.4 0.3



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Table A1.4 Merchandise imports by origin, 2009-14

(US$ million and %) 2009 2010 2011 2012 2013 2014 Total imports (US$ million) 966.1 1,095.1 1,411.7 1,554.5 1,733.3 1,992.7 (% of total) America 9.6 9.5 5.3 6.2 4.5 4.0 United States 2.5 2.6 2.1 2.9 1.7 1.7 Other America 7.0 6.9 3.2 3.2 2.7 2.3 Canada 1.6 0.7 1.3 0.5 0.4 1.4 Brazil 0.3 0.6 0.7 0.7 1.1 0.8 Europe 10.6 9.8 10.1 8.0 11.1 9.7 EU-28 9.4 8.3 8.6 7.0 10.3 8.8 Germany 2.0 1.8 1.8 1.8 1.7 1.7 Italy 1.1 1.3 1.6 1.0 1.4 1.5 United Kingdom 1.1 0.9 1.1 1.1 0.9 1.4 Ireland 0.0 0.1 0.0 0.1 1.2 0.9 The Netherlands 0.9 0.8 0.7 0.6 0.6 0.9 France 1.6 1.0 0.8 1.0 2.0 0.9 EFTA 0.9 0.7 0.9 0.5 0.4 0.4 Other Europe 0.3 0.7 0.5 0.5 0.4 0.5 Commonwealth of Independent States (CIS)

0.0 0.0 0.0 0.0 0.0 0.0

Africa 0.6 1.4 0.6 0.5 0.5 0.5 Middle East 16.1 19.7 23.7 30.4 30.8 28.5 United Arab Emirates 15.7 18.8 21.8 29.9 28.4 23.7 Bahrain 0.0 0.6 1.2 0.0 1.9 4.0 Oman 0.1 0.2 0.3 0.3 0.5 0.6 Asia 63.2 59.6 60.4 55.0 53.1 57.3 China 2.7 2.9 5.2 4.4 4.7 5.3 Japan 1.3 0.9 2.3 0.7 0.8 0.8 Six East Asian Traders 34.5 32.1 32.4 29.6 27.7 30.7 Singapore 21.4 17.9 21.6 18.1 16.2 17.5 Malaysia 6.6 7.1 5.4 5.5 4.9 7.3 Thailand 5.0 5.3 4.2 4.8 5.0 4.4 Hong Kong, China 0.8 1.1 0.8 0.7 1.3 1.1 Other Asia 24.7 23.7 20.4 20.2 19.8 20.5 India 12.1 11.5 10.1 9.5 8.9 8.6 Sri Lanka 6.5 5.8 5.6 5.9 5.9 6.5 Australia 2.8 2.8 2.2 2.0 1.9 1.8 Indonesia 2.0 1.9 1.4 1.6 1.5 1.7 New Zealand 0.7 1.1 0.5 0.5 0.7 1.0



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Table A3.1 Maldives' MFN applied tariff summary, 2015a

Number of lines

Average (%)

Range (%)

Coefficient of

variation (%)

Duty free (%)

Total 8,661 13.9 0-766.7 1.8 31.5 HS 01-24 1,543 9.8 0-766.7 3.4 75.3 HS 25-97 7,118 14.8 0-400 1.5 22.0 By WTO category WTO agricultural products 1,233 11.3 0-766.7 3.3 74.1 Animals and products thereof 149 12.9 0-50 1.4 63.1 Dairy products 41 0.0 0-0 0.0 100.0 Fruit, vegetables, and plants 365 3.9 0-25 2.3 83.6 Coffee and tea 33 6.1 0-50 2.7 87.9 Cereals and preparations 198 3.9 0-50 3.3 91.4 Oils seeds, fats, oil and their products 98 6.6 0-50 2.2 77.6 Sugars and confectionary 33 1.8 0-50 4.7 90.9 Beverages, spirits and tobacco 138 52.1 0-766.7 1.9 47.8 Cotton 8 15.0 15-15 0.0 0.0 Other agricultural products, n.e.s. 170 9.4 0-25 1.1 54.1 WTO non-agricultural products 7,428 14.3 0-400 1.5 24.4 Fish and fishery products 381 5.9 0-50 1.6 68.5 Minerals and metals 1,469 7.1 0-50 1.0 28.0 Chemicals and photographic supplies 1,348 15.4 0-400 2.1 19.4 Wood, pulp, paper and furniture 478 5.2 0-50 1.4 45.6 Textiles 793 15.8 0-400 1.3 3.0 Clothing 279 0.0 0-0 0.0 100.0 Leather, rubber, footwear and travel goods 216 21.2 0-50 0.6 13.4 Non-electric machinery 913 21.2 0-60 0.5 5.6 Electric machinery 521 19.9 0-50 0.7 12.7 Transport equipment 243 46.7 0-200 1.0 5.8 Non-agricultural products, n.e.s. 766 16.0 0-150 1.2 23.9 Petroleum 21 2.4 0-10 1.8 76.2 By ISIC sector ISIC 1 - Agriculture, hunting and fishing 533 8.2 0-200 2.2 68.7 ISIC 2 - Mining 123 1.3 0-25 4.2 94.3 ISIC 3 - Manufacturing 8,004 14.5 0-766.7 1.7 28.0 Manufacturing excluding food processing 6,960 15.0 0-400 1.5 20.7 Electrical energy 1 0.0 0 0.0 100.0 By stage of processing First stage of processing 986 7.6 0-200 1.9 65.9 Semi-processed products 2,182 12.1 0-400 1.5 18.3 Fully processed products 5,493 15.7 0-766.7 1.8 30.5 By HS section 01 Live animals and products 526 7.7 0-50 1.6 67.1 02 Vegetable products 482 3.0 0-25 2.7 87.3 03 Fats and oils 65 5.4 0-50 2.9 89.2 04 Prepared food, beverages and tobacco 470 20.0 0-766.7 2.9 70.2 05 Mineral products 197 0.4 0-15 5.3 96.4 06 Chemicals and products thereof 1,203 11.4 0-100 0.8 24.4 07 Plastics, rubber, and articles thereof 362 30.5 0-400 2.0 6.1 08 Raw hides and skins, leather, and its

products 73 20.0 20-20 0.0 0.0

09 Wood and articles of wood 156 10.9 0-25 0.8 26.3 10 Pulp of wood, paper and paperboard 197 2.7 0-25 2.9 89.3 11 Textiles and textile articles 1,041 11.7 0-400 1.6 28.0 12 Footwear, headgear, etc. 58 10.5 0-25 1.1 51.7 13 Articles of stone, plaster, cement 296 5.1 0-50 1.7 57.8 14 Precious stones and metals, pearls 68 24.6 0-25 0.1 1.5 15 Base metals and articles thereof 939 8.0 0-50 0.6 4.6 16 Machinery, electrical equipment, etc. 1,474 20.2 0-50 0.6 9.7 17 Transport equipment 259 45.6 0-200 1.0 5.4 18 Precision equipment 347 12.9 0-25 0.6 17.3


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Number of lines

Average (%)

Range (%)

Coefficient of

variation (%)

Duty free (%)

19 Arms and ammunition 57 35.0 35-35 0.0 0.0 20 Miscellaneous manufactured articles 384 12.5 0-200 1.9 23.2 21 Works of art, etc. 7 25.0 25-25 0.0 0.0

a As of end-October.

Note: Including AVEs, as available, based on 2014 import data provided by the authorities.



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Table A3.2 Maldives' MFN and SAFTA tariff summaries, 2015

MFN applied SAFTA

Number of lines

Average (%)

Range (%) CV

Duty free (%)

Average (%)

Range (%) CV

Duty free (%)

Total 8,661 13.9 0-766.7 1.8 31.5 5.3 0-766.7 3.5 43.0 HS 01-24 1,543 9.8 0-766.7 3.4 75.3 4.7 0-766.7 5.6 75.3 HS 25-97 7,118 14.8 0-400 1.5 22.0 5.4 0-400 3.0 36.0 By WTO category WTO agricultural products 1,233 11.3 0-766.7 3.3 74.1 5.0 0-766.7 5.9 76.6 Animals and products

thereof 149 12.9 0-50 1.4 63.1 4.8 0-50 2.0 63.1

Dairy products 41 0.0 0-0 0.0 100.0 0.0 0-0 0.0 100.0 Fruit, vegetables, and

plants 365 3.9 0-25 2.3 83.6 1.6 0-25 2.7 83.6

Coffee and tea 33 6.1 0-50 2.7 87.9 6.1 0-50 2.7 87.9 Cereals and

preparations 198 3.9 0-50 3.3 91.4 2.1 0-50 4.1 91.4

Oils seeds, fats, oil and their products

98 6.6 0-50 2.2 77.6 2.0 0-14 2.0 77.6

Sugars and confectionary

33 1.8 0-50 4.7 90.9 1.7 0-50 5.1 90.9

Beverages, spirits and tobacco

138 52.1 0-766.7 1.9 47.8 26.3 0-766.7 3.2 47.8

Cotton 8 15.0 15-15 0.0 0.0 0.0 0-0 0.0 100.0 Other agricultural

products, n.e.s. 170 9.4 0-25 1.1 54.1 2.3 0-8 1.5 67.1

WTO non-agricultural products

7,428 14.3 0-400 1.5 24.4 5.4 0-400 3.0 37.5

Fish and fishery products

381 5.9 0-50 1.6 68.5 3.4 0-50 1.9 68.5

Minerals and metals 1,469 7.1 0-50 1.0 28.0 3.5 0-25 1.1 40.0 Chemicals and

photographic supplies 1,348 15.4 0-400 2.1 19.4 6.8 0-400 4.8 22.9

Wood, pulp, paper and furniture

478 5.2 0-50 1.4 45.6 2.2 0-11 1.2 45.8

Textiles 793 15.8 0-400 1.3 3.0 0.3 0-11 4.3 94.2 Clothing 279 0.0 0-0 0.0 100.0 0.0 0-0 0.0 100.0 Leather, rubber,

footwear and travel goods

216 21.2 0-50 0.6 13.4 7.1 0-11 0.4 13.4

Non-electric machinery 913 21.2 0-60 0.5 5.6 6.9 0-50 0.8 5.6 Electric machinery 521 19.9 0-50 0.7 12.7 7.3 0-50 0.6 12.7 Transport equipment 243 46.7 0-200 1.0 5.8 28.4 0-100 1.1 5.8 Non-agricultural

products, n.e.s. 766 16.0 0-150 1.2 23.9 5.6 0-34 0.9 26.0

Petroleum 21 2.4 0-10 1.8 76.2 0.0 0-0 0.0 100.0 By ISIC sector ISIC 1 - Agriculture,

hunting and fishing 533 8.2 0-200 2.2 68.7 2.9 0-34 2.0 70.9

ISIC 2 - Mining 123 1.3 0-25 4.2 94.3 0.4 0-7.2 4.2 94.3 ISIC 3 - Manufacturing 8,004 14.5 0-766.7 1.7 28.0 5.5 0-766.7 3.5 40.4 Manufacturing

excluding food processing

6,960 15.0 0-400 1.5 20.7 5.5 0-400 3.0 34.8

By stage of processing First stage of processing 986 7.6 0-200 1.9 65.9 2.6 0-34 2.0 72.2 Semi-processed

products 2,182 12.1 0-400 1.5 18.3 3.4 0-400 5.1 45.4

Fully processed products

5,493 15.7 0-766.7 1.8 30.5 6.5 0-766.7 3.1 36.8

By HS section 01 Live animals and

products 526 7.7 0-50 1.6 67.1 3.3 0-50 1.8 67.1

02 Vegetable products 482 3.0 0-25 2.7 87.3 1.1 0-25 3.0 87.3 03 Fats and oils 65 5.4 0-50 2.9 89.2 1.5 0-14 2.9 89.2 04 Prepared food,

beverages and tobacco 470 20.0 0-766.7 2.9 70.2 10.4 0-766.7 4.5 70.2

05 Mineral products 197 0.4 0-15 5.3 96.4 0.0 0-4.3 9.9 99.0 06 Chemicals and

products thereof 1,203 11.4 0-100 0.8 24.4 2.7 0-10 0.8 28.8

07 Plastics, rubber, and articles thereof

362 30.5 0-400 2.0 6.1 19.6 0-400 3.1 6.1

08 Raw hides and skins, leather, and its products

73 20.0 20-20 0.0 0.0 8.0 8-8 0.0 0.0

09 Wood and articles of wood

156 10.9 0-25 0.8 26.3 4.1 0-10 0.7 26.9


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MFN applied SAFTA

Number of lines

Average (%)

Range (%) CV

Duty free (%)

Average (%)

Range (%) CV

Duty free (%)

10 Pulp of wood, paper and paperboard

197 2.7 0-25 2.9 89.3 0.8 0-7.2 2.9 89.3

11 Textiles and textile articles

1,041 11.7 0-400 1.6 28.0 0.0 0-0 0.0 100.0

12 Footwear, headgear, etc.

58 10.5 0-25 1.1 51.7 3.0 0-7.2 1.1 51.7

13 Articles of stone, plaster, cement

296 5.1 0-50 1.7 57.8 2.5 0-10 1.2 57.8

14 Precious stones and metals, pearls

68 24.6 0-25 0.1 1.5 11.3 0-25 0.7 1.5

15 Base metals and articles thereof

939 8.0 0-50 0.6 4.6 4.2 0-10 0.7 23.3

16 Machinery, electrical equipment, etc.

1,474 20.2 0-50 0.6 9.7 6.9 0-50 0.8 10.8

17 Transport equipment 259 45.6 0-200 1.0 5.4 27.1 0-100 1.2 5.4 18 Precision equipment 347 12.9 0-25 0.6 17.3 5.4 0-20 0.6 17.3 19 Arms and

ammunition 57 35.0 35-35 0.0 0.0 8.6 8.1-11 0.1 0.0

20 Miscellaneous manufactured articles

384 12.5 0-200 1.9 23.2 4.8 0-34 1.3 23.2

21 Works of art, etc. 7 25.0 25-25 0.0 0.0 7.2 7.2-7.2 0.0 0.0

CV Coefficient of variation.

Note: Including AVEs, as available.

Source: WTO Secretariat calculations, based on Maldives Customs Service online information and data provided by the authorities.


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Table A3.3 List of tariff lines where applied MFN rates exceed bindings, 2015

HS codes Description MFN applied rate (%)

Bound rate (%)

0106901000 Live dangerous animals 35 30 0209100000 Pig fat 50 30 1501100000 Lard 50 30 1501200000 Pig fat 50 30 1503000000 Lard stearin, lard oil 50 30 1516101000 Fats and oils of swine 50 30 1517101000 Margarine containing swine 50 30 1517901000 Shortening containing swine 50 30 1518001000 Animal or vegetable fats and oils 50 30 1601001010 Pork sausages 50 30 1601001099 Other products of pork 50 30 1602201000 Preparations of swine liver 50 30 1704901000 Sugar confectionary containing wine 50 30 1806201000 Chocolate containing spirit 50 30 1806311000 Chocolate containing spirit 50 30 1806321010 Chocolate containing spirit 50 30 1806901000 Chocolate and food preparations containing spirit 50 30 1901201010 Mixes and doughs containing liquor 50 30 1901901000 Food preparation of flour containing spirit 50 30 1902201000 Stuffed pasta containing wine 50 30 1902301000 Other pasta containing wine 50 30 1902401000 Couscous containing swine 50 30 1904901010 Biriyani, pre-cooked, containing swine 50 30 1904901099 Other prepared food containing swine or wine 50 30 1905901000 Pudding containing spirit 50 30 2009111000 Orange juice 50 30 2009121000 Orange juice 50 30 2009191000 Orange juice containing spirit 50 30 2009211000 Grapefruit juice 50 30 2009291000 Other grapefruit juice containing spirit 50 30 2009311000 Juice of single fruit 50 30 2009391000 Juices of single citrus fruit 50 30 2009411000 Pineapple juice containing spirit 50 30 2009491000 Pineapple juice containing spirit 50 30 2009501000 Tomato juice containing spirit 50 30 2009611000 Grape juice 50 30 2009691000 Other unfrozen grape juice containing spirit 50 30 2009711000 Apple juice 50 30 2009791000 Apple juice containing spirit 50 30 2009811000 Cranberry juice containing spirit 50 30 2009891000 Juices of single fruit or vegetable, containing spirit 50 30 2009901000 Mixed fruit juice containing spirit 50 30 2103909099 Sauces, seasoning, etc. containing spirit 50 30 2104101000 Soups containing ham 50 30 2104201000 Homogenized composite food preparations 50 30 2202109000 Soft drinks containing spirit 50 30 2202909000 Other beverages containing spirit 50 30 2206000010 Sake 50 30 2206000011 Other fermented beverages, n.e.s. 50 30 2209009000 Vinegar containing spirit 50 30 2402200014 Cigarettes - American Legend 766.7a 300 2402200099 Cigarettes - not specified elsewhere 412.2a 300 2903711000 Freon (chlorodifluoromethane) 100 30 2903720010 Freon (dichlorotrifluoroethane) 100 30


- 86 -


Bound rate (%)

2903730010 Freon (1,1-dichloro-1-fluoroethane) 100 30 2903740010 Freon (chlorodifluoroethane) 100 30 3601000000 Propellant powders 35 30 3602000000 Other prepared explosives 35 30 3603000011 Blasting accessories (explosives) 35 30 3604100000 Fireworks 35 30 3604900010 Parachute rocket 35 30 3604900011 Other pyrotechnic articles 35 30 3606909010 Fire starter 35 30 3606909011 Chafing fuel (ethanol, methanol and other alcohol

based) 35 30

3606909099 Articles of combustible materials, n.e.s. 35 30 3920101010 Sheets, plates and foils of polythene 400 30 3920101011 Sheets, plates and foils of polythene 400 30 3920101012 Cling film, packaging film of polythene 400 30 3920101013 Cling film of polythene 400 30 3923211010 Sacks and bags of polymers of ethylene 400 30 3923211011 Pelican tank/bag 400 30 3923211012 Polythene tube roll for packaging 400 30 3923211013 Polythene tube roll for packaging 400 30 3923291000 Bags of plastics 400 300 4011100000 New pneumatic tyres of rubber 50 30 4011200010 New pneumatic tyres of rubber 50 30 4011200011 New pneumatic tyres of rubber 50 30 4011400000 New pneumatic tyres of rubber 50 30 4011610000 New pneumatic tyres of rubber 50 30 4011620000 New pneumatic tyres of rubber 50 30 4011630000 New pneumatic tyres of rubber 50 30 4011930000 New pneumatic tyres of rubber 50 30 4011940000 New pneumatic tyres of rubber 50 30 4011991010 New pneumatic tyres of rubber 50 30 4011991011 New pneumatic tyres of rubber 50 30 4012110000 Retreaded/used tyres of rubber 50 30 4012120000 Retreaded/used tyres of rubber 50 30 4012190000 Retreaded/used tyres of rubber 50 30 4012201010 Retreaded/used tyres of rubber 50 30 4012201011 Retreated/used tyres of rubber 50 30 4012201012 Retreated/used tyres of rubber 50 30 4012201013 Retreated/used tyres of rubber 50 30 4012201014 Retreated/used tyres of rubber 50 30 4012201015 Retreated/used tyres of rubber 50 30 4012900000 Retreated/used tyres of rubber 50 30 4013100010 Inner tubes of rubber 50 30 4013100011 Inner tubes of rubber 50 30 4013100012 Inner tubes of rubber 50 30 4013901010 Inner tubes of rubber 50 30 4013901011 Inner tubes of rubber 50 30 4013901012 Inner tubes of rubber 50 30 4013901099 Inner tubes of rubber 50 30 6304919000 Seat covers for vehicles 50 30 6304929000 Other furnishing articles (..) of cotton 50 30 6304939000 Chair cloth 50 30 6304999000 Other furnishing articles (..) of other textile materials 50 30 6305331010 Bags of polyethylene for packing goods 400 30 6305331011 Sacks of polyethylene for packing goods 400 30


- 87 -


Bound rate (%)

7007119010 Glass (safety) used for cars 50 30 7007119011 Glass (safety) used for other passenger vehicles 50 30 7007219010 Laminated safety glass for auto cycles, motor cycles

and passenger vehicles 50 30

7007219011 Laminated safety glass for vehicles other than passenger vehicles

50 30

7009100010 Rear view mirrors (for motor cycles) 50 30 7009100011 Rear view mirrors (for passenger vehicles ) 50 30 7009100012 Rear view mirrors (for other vehicles) 50 30 8301201010 Locks (for vehicles ) 50 30 8301201011 Locks (for motor cycles) 50 30 8301201099 Locks (for vehicles other than passenger vehicles and

motor cycles) 50 30

8301609010 Motor vehicle lock parts 50 30 8301709010 Keys for motor vehicles 50 30 8407311010 Engines for motor vehicles/cycles 50 30 8407311011 Engines for motor vehicles/cycles 50 30 8407321010 Engines for motor vehicles/cycles 50 30 8407321011 Engines for motor vehicles/cycles 50 30 8407321012 Engines for motor vehicles/cycles 50 30 8407331010 Engines for motor vehicles/cycles 50 30 8407331011 Engines for motor vehicles/cycles 50 30 8407341010 Engines for motor vehicles/cycles 50 30 8407341011 Engines for motor vehicles/cycles 50 30 8407341012 Engines for motor vehicles/cycles 50 30 8407901010 Engines for motor vehicles/cycles 50 30 8407901011 Engines for motor vehicles/cycles 50 30 8408201010 Engines for motor vehicles/cycles 50 30 8408201011 Engines for motor vehicles/cycles 50 30 8409911010 Engine parts for motor vehicles/cycles 50 30 8409911011 Engine parts for motor vehicles/cycles 50 30 8409911012 Engine parts for motor vehicles/cycles 50 30 8409991010 Engine parts for motor vehicles/cycles 50 30 8409991011 Engine parts for motor vehicles/cycles 50 30 8409991012 Engine parts for motor vehicles/cycles 50 30 8413301010 Fuel pump for passenger vehicles 50 30 8413301011 Fuel pump other than for passenger vehicles 50 30 8413811100 Water pump for internal combustion engines of

vehicles 50 30

8413911000 Parts of pumps for liquids (for vehicles) 50 30 8414801000 Air compressor (for vehicles) 50 30 8414901000 Pump parts for vehicles 50 30 8421231110 Oil/fuel filter for passenger vehicles 50 30 8421231199 Oil/fuel filter other than for passenger vehicles 50 30 8421311110 Air filter for passenger vehicles 50 30 8421311199 Air filter for other vehicles 50 30 8426190000 Transporter cranes 50 30 8426301000 Portable cranes, self-propelled 50 30 8426410000 Self-propelled machinery on tyres 50 30 8427100010 Forklift, stacking trucks 50 30 8427100011 Forklift, stacking trucks 50 30 8427200010 Forklift, stacking trucks 50 30 8427200011 Forklift, stacking trucks 50 30 8427901000 Forklift, stacking trucks 50 30 8429110000 Bulldozers and angle dozers 50 30 8429190000 Bulldozers and angle dozers 50 30


- 88 -


Bound rate (%)

8429200000 Self-propelled graders and levellers 50 30 8429300000 Self-propelled scrapers 50 30 8429400010 Road roller 50 30 8429400011 Tamping machine 50 30 8429510000 Self-propelled shovel loader 50 30 8429520000 Self-propelled bulldozer 50 30 8429590010 Excavator, n.e.s. 50 30 8430200000 Other moving machinery 50 30 8430310000 Other moving machinery 50 30 8430410000 Other moving machinery 50 30 8430500000 Other moving machinery 50 30 8482101010 Ball or roller bearings for vehicles 50 30 8482101011 Ball or roller bearings for vehicles 50 30 8482201010 Ball or roller bearings for vehicles 50 30 8482201011 Ball or roller bearings for vehicles 50 30 8482301010 Ball or roller bearings for vehicles 50 30 8482301011 Ball or roller bearings for vehicles 50 30 8482401010 Ball or roller bearings for vehicles 50 30 8482401011 Ball or roller bearings for vehicles 50 30 8482501010 Ball or roller bearings for vehicles 50 30 8482501011 Ball or roller bearings for vehicles 50 30 8482801010 Ball or roller bearings for vehicles 50 30 8482801011 Ball or roller bearings for vehicles 50 30 8482911010 Ball or roller bearings for vehicles 50 30 8482911011 Ball or roller bearings for vehicles 50 30 8482991010 Ball or roller bearings for vehicles 50 30 8482991011 Ball or roller bearings for vehicles 50 30 8483301010 Transmission shafts, gear boxes, etc. for vehicles 50 30 8483301011 Transmission shafts, gear boxes, etc. for vehicles 50 30 8483401000 Transmission shafts, gear boxes, etc. for vehicles 50 30 8483501000 Transmission shafts, gear boxes, etc. for vehicles 50 30 8483601000 Transmission shafts, gear boxes, etc. for vehicles 50 30 8483901000 Transmission shafts, gear boxes, etc. for vehicles 50 30 8484101010 Metal gasket for vehicles 50 30 8484101011 Metal gasket for vehicles 50 30 8484101012 Gasket in sets (metal or different materials) for

vehicles 50 30

8501101000 Motors and parts thereof for vehicles 50 30 8501201000 Motors and parts thereof for vehicles 50 30 8501311100 Motors and parts thereof for vehicles 50 30 8501321100 Motors and parts thereof for vehicles 50 30 8501331100 Motors and parts thereof for vehicles 50 30 8501341100 Motors and parts thereof for vehicles 50 30 8501401000 Motors and parts thereof for vehicles 50 30 8501511000 Motors and parts thereof for vehicles 50 30 8501521000 Motors and parts thereof for vehicles 50 30 8501531000 Motors and parts thereof for vehicles 50 30 8501611010 Alternator AC (output not exceeding 75 kVA) for

vehicles 50 30

8501631010 Alternator AC (output 375 kVA to 750 kVA) for vehicles 50 30 8501641010 Alternator AC (output exceeding 750 kVA) for vehicles 50 30 8503001000 Motors and parts thereof for vehicles 50 30 8504401000 Static converters for vehicles 50 30 8505201000 Other electrical apparatus for vehicles 50 30 8507101000 Accumulators used in vehicles 50 30 8507201000 Accumulators used in vehicles 50 30


- 89 -


Bound rate (%)

8507301000 Accumulators used in vehicles 50 30 8507401000 Accumulators used in vehicles 50 30 8507501000 Accumulators used in vehicles 50 30 8507601000 Accumulators used in vehicles 50 30 8507801000 Accumulators used in vehicles 50 30 8507901000 Accumulators used in vehicles 50 30 8511101000 Electrical ignition or starting equipment, for vehicles 50 30 8511201000 Electrical ignition or starting equipment 50 30 8511301000 Electrical ignition or starting equipment, for vehicles 50 30 8511409000 Electrical ignition or starting equipment, for vehicles 50 30 8511901000 Starter motor parts for vehicles 50 30 8512201010 Lights for vehicles 50 30 8512201011 Lights for vehicles 50 30 8512301010 Sound signalling equipment for vehicles 50 30 8512301011 Sound signalling equipment for vehicles 50 30 8512301012 Sound signalling equipment for vehicles 50 30 8512301013 Sound signalling equipment for vehicles 50 30 8512401010 Windscreen wipers for vehicles 50 30 8512401011 Windscreen wipers for vehicles 50 30 8512901010 Lightning or visual/sound signalling for vehicles, parts 50 30 8512901011 Lightning or visual/sound signalling for vehicles, parts 50 30 8527210000 Radio receivers for vehicles 50 30 8527290000 Radio receivers for vehicles 50 30 8529101010 Antenna for vehicles 50 30 8529101011 Antenna for vehicles 50 30 8532291000 Fixed electrical capacitors (for vehicles), n.e.s. 50 30 8533101000 Electrical resistors for vehicles 50 30 8533211000 Electrical resistors for vehicles 50 30 8533291000 Electrical resistors for vehicles 50 30 8533311000 Electrical resistors for vehicles 50 30 8533391000 Electrical resistors for vehicles 50 30 8533401010 Electrical resistors for vehicles 50 30 8533401011 Electrical resistors for vehicles 50 30 8533401012 Electrical resistors for vehicles 50 30 8536101000 Other electrical apparatus for vehicles 50 30 8536419000 Other electrical apparatus for vehicles 50 30 8536499000 Other electrical apparatus for vehicles 50 30 8536501000 Other electrical apparatus for vehicles 50 30 8536691010 Other electrical apparatus for vehicles 50 30 8536691011 Other electrical apparatus for vehicles 50 30 8536901000 Other electrical apparatus for vehicles 50 30 8539291110 Other electrical apparatus for vehicles 50 30 8539291111 Other electrical apparatus for vehicles 50 30 8539901000 Other electrical apparatus for vehicles 50 30 8544301010 Ignition wiring for vehicles 50 30 8544301011 Ignition wiring for vehicles 50 30 8545201000 Carbon brushes for vehicles 50 30 9301100010 Arms and weapons 35 30 9301100011 Arms and weapons 35 30 9301200000 Arms and weapons 35 30 9301900010 Arms and weapons 35 30 9301900011 Arms and weapons 35 30 9301900012 Arms and weapons 35 30 9301900013 Arms and weapons 35 30 9301900014 Arms and weapons 35 30


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Bound rate (%)

9301900015 Arms and weapons 35 30 9301900016 Arms and weapons 35 30 9301900017 Arms and weapons 35 30 9301900099 Arms and weapons 35 30 9302000010 Arms and weapons 35 30 9302000011 Arms and weapons 35 30 9302000012 Arms and weapons 35 30 9302000013 Arms and weapons 35 30 9303100000 Arms and weapons 35 30 9303200010 Arms and weapons 35 30 9303200011 Arms and weapons 35 30 9303200012 Arms and weapons 35 30 9303200013 Arms and weapons 35 30 9303200014 Arms and weapons 35 30 9303300010 Arms and weapons 35 30 9303300011 Arms and weapons 35 30 9303900010 Arms and weapons 35 30 9303900011 Arms and weapons 35 30 9304000010 Arms and weapons 35 30 9305100010 Arms and weapons 35 30 9305100011 Arms and weapons 35 30 9305100012 Arms and weapons 35 30 9305100013 Arms and weapons 35 30 9305100014 Arms and weapons 35 30 9305100015 Arms and weapons 35 30 9305100016 Arms and weapons 35 30 9305100017 Arms and weapons 35 30 9305200010 Arms and weapons 35 30 9305200011 Arms and weapons 35 30 9305200012 Arms and weapons 35 30 9305200013 Arms and weapons 35 30 9305200014 Arms and weapons 35 30 9305200015 Arms and weapons 35 30 9305200016 Arms and weapons 35 30 9305200017 Arms and weapons 35 30 9305910010 Arms and weapons 35 30 9305910011 Arms and weapons 35 30 9305910012 Arms and weapons 35 30 9305910013 Arms and weapons 35 30 9305910014 Arms and weapons 35 30 9305910015 Arms and weapons 35 30 9305910016 Arms and weapons 35 30 9305910017 Arms and weapons 35 30 9305990000 Arms and weapons 35 30 9306210000 Arms and weapons 35 30 9306290000 Arms and weapons 35 30 9306300000 Arms and weapons 35 30 9306900000 Arms and weapons 35 30 9307000000 Arms and weapons 35 30 9401200000 Seats used for motor vehicles 50 30 9401901000 Seat parts for motor vehicles 50 30 9614000010 Smoking pipes, cigarettes/cigar holders 200 30 9614000011 Smoking pipes, cigarettes/cigar holders 200 30 9614000012 Smoking pipes, cigarettes/cigar holders 200 30 9614000013 Smoking pipes, cigarettes/cigar holders 200 30


- 91 -


Bound rate (%)

9614000099 Smoking pipes, cigarettes/cigar holders 200 30

a Figure corresponds to an AVE.

Source: WTO Secretariat calculations, based on Maldives Customs Service online information.


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Table A3.4 Public enterprises of the Republic of Maldives

Name Proportion of shareholding

Field of industry GoM Private sector

Addu Investments Pvt. Ltd. 30% 70% Shangri-La Tourism Air Maldives Ltd.ab 51% 49% Naluri Bhd Aviation Bank of Maldives Plc 50.8% 29.49% public, 4.25% STO,

4.07% MTCC, 7.33% Govt. Emp. PF, 4.07% Rayyithunge Account

Banking

Dhivehi Raajjeyge Gulhun Plc 41.8% 52.0% Batelco, public 5.90%, Dhiraagu Colleagu share plan 0.30%

Telecommunication

Housing Development Finance Corporation Plc

49% ADB 18% , IFC 18%, HDFC India 15%

Financial institution (for housing projects)

Housing Development Corporation Ltd. 100% Residential housing Island Aviation Services Ltd. 100% Aviation Madivaru Holdings Private Limitedab 25% 9% IAS, 7% MACL, 1.6%

STO, 57.4% several individual investors

Airports

Maldives Airports Company Ltd. 100% Airports Maldives Industrial Fisheries Company Ltd.

100% Fisheries

Maldives National Shipping Ltd.a 100% Shipping Maldives Ports Limited 100% Cargo handling Maldives Post Ltd. 100% Courier service Maldives Tourism Development Corporation Plc

47% 53% public Tourism

Maldives Transport and Contracting Company Plc

47.8% 7.5% MNSL, 44.7% public Public transport

Male Water and Sewerage Company Pvt. Ltd.

80% Hitachi 20% Water and sewerage

State Electric Company Ltd. 100% Provision of electricity State Trading Organization Plc 81.63% 18.37% public General trading Vilingili Investments Pvt. Ltd.b 30% 70% Energy Tours Maldives National Broadcasting Corporation Limiteda

100% Broadcasting

Central Utilities Limiteda 100% Provision of utilities Maldives Entertainment Company Limiteda

100% Entertainment

North Central Utilities Limiteda 100% Provision of utilities Northern Utilities Limiteda 100% Provision of utilities South Central Utilities Limiteda 100% Provision of utilities Southern Utilities Limiteda 100% Provision of utilities Thilafushi Corporation Limited 100% Industrial Island Upper North Utilities Limiteda 100% Provision of utilities Upper South Utilities Limiteda 100% Provision of utilities Waste Management Corporation Limiteda

100% Waste management

Hulhumale Integrated Economic Zone Ltd.

100%

Gulhifalhu Investment Ltd. 100% Housing development / industrial

Works Corporation Limiteda 100% Contract business Hithadhoo Port Limiteda 100% Cargo handling Gan Airport Company Limiteda 100% Airports Kulhudhuffushi Port Limiteda 100% Cargo handling Hanimaadhoo Airport Company Limitedc

100%

Felivaru Port Limitedc 100% Maldives Industrial Agriculture Company Limitedc

100%

Maldives Marketing and Public Relations Corporation Ltd.

100% Marketing and PR

Maldives Islamic Bank Private Limited 15% 85% ICD Banking


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Male Health Services Corporation Limiteda

100% Provision of health services

Kooddoo Fisheries Maldives Limiteda 100% Fisheries Felivaru Fisheries Maldives Limiteda 100% Fisheries Southern Health Services Corporation Limiteda


Maldives Road Development Corporation Limited

100% Construction

Central Health Service Corporationa 100% Provision of health services

Northern Health Service Corporationa 100% Provision of health services

North Central Health Service Corporationa


South Central Health Service Corporationa


Upper North Health Service Corporationa


Upper South Health Service Corporationa


Kaddoo Airport Company Limiteda 100% Airports Dutch Docklands Maldives Pvt. Ltd. 5% 95% Dutch Docklands

International BV

Kuda Villingili Developments Pvt. Ltd. 5% 95% Yacht Tours Maldives Pvt. Ltd.

Vermillion Private Limited 5% 95% Vermillion International Pvt. Ltd.

Manage and operate a resort (transport service provider)

Dheebaja Maldives Private Limited 5% 95% Dheebaja Investments Pvt. Ltd.

Manage and operate a resort (transport service provider)

Ifuru Investments Private Limited 5% 95% Agro Marine Cocoon Investments Pvt. Ltd. 5% 95% BIR Investments Manage and operate a

resort (transport service provider)

Addu International Airport Pvt. Ltd. 40% 10% MACL, 10% STO, 10%GACL, 30% KASA

Kulhudhuffushi Development Corporation

51% 49% Island Kulhudhuffushi Council

Thinadhoo Development Corporation 51% 49% Island Thinadhoo Council

Fuahmulak Development Corporation 51% 49% Island Fuahmulak Council

Trinus-CAE Southern Hotels and Resorts

5% 95% Trinus CAE-Holdings Manage and operate a resort (transport service provider)

Trinus-CAE Northern Hotels and Resorts

5% 95% Trinus CAE-Holdings Manage and operate a resort (transport service provider)

Aasandha Pvt. Ltd. 40% 60% Allied Insurance Company Ltd.

Health insurance

Kaadedhoo Airport Company Ltd.c 100% Fenaka Corporation Limited 100% Provision of utilities SIFCO 10% 90% Sifainge Welfare

Corporative

Trifidus Investment Pvt. Ltd. 10% 90% Olhahali Investment Pvt. Ltd.

Conversion of K.Olhahali to tourist resort

Aqua Sun Investment Pvt. Ltd. 10% 90% Aqua Sun Holidays Pvt. Ltd.

Conversion of AA. Ethere Madivaru to tourist resort

Malahini Holdings Pvt. Ltd. 10% 90% TRI Investment Services Pvt. Ltd.

Conversion of K. Kuda Bandos to tourist resort

Handhuvaru Ocean Resorts Pvt. Ltd. 10% 90% Handhuvaru Ocean Holidays Pvt. Ltd.

Conversion of V. Ambaara to tourist resort

Male International Airport Pvt. Ltd. 100% Operation of Male International Airport

Maldives Hajj Corporation Limited 100%


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Koddipparu Investment Pvt. Ltd. 10% 90% Top Deck Investment Pvt. Ltd.

Development of K. Koddipparu as a tourist resort

Akirifushi Investment Pvt. Ltd. 10% 90% Akirifushi Development Company Pvt. Ltd.

Development of K. Akirifushi as a tourist resort

Zen Resorts Pvt. Ltd. 10% 90% Ridgewood Hotels and Suites Pvt. Ltd.

Development of N. Kuredhivaru as a tourist resort

Maldives Overseas Investment Pvt. Ltd. 10% 90% Investment Company Pvt. Ltd.

Development of F. Himithi as a tourist resort

Kandholhudhoo Island Investment Pvt. Ltd.

10% 90% Universal Enterprise Pvt. Ltd.

Conversion of AA. Kandholhudhoo as tourist resort

Nackachaa Huraa Holdings Pvt. Ltd. 10% 90% Universal Enterprise Pvt. Ltd.

Conversion of K. Nackachaa Huraa to a tourist resort

POLWEK 10% 90% Police Corporative Society

For tourism related work

Maldives Green Fund 100% Environment & renewable energy

Big Stone Investment Pvt. Ltd. 10% 90% Ellaidhoo Investment Private Limited

Conversion of Aa. Maagau as a tourist resort

Dhonkeyo Holdings Private Limited 10% 90% Dhonkeyo Holdings Private Limited

Prime Capital Maldives 25% 75% Prime Capital Maldives Fushifaru Investment Pvt. Ltd. 10% 90% Muni Enterprises Pvt.

Ltd.

Thiladhoo Investment Pvt. Ltd. 10% 90% MVK Maldives Angiri Joint Venture Private Limited 10% 90% Angiri Resorts

Management and Operations Pvt. Ltd.

Veli Madivaru Pvt. Ltd. 10% 90% Crown Company Pvt. Ltd.

MRT Holdings Pvt. Ltd. 10% 90% Kandooma Holdings Pvt. Ltd.

Theluveliga Retreat Pvt. Ltd. 10% 90% My Travels Maldives Pvt. Ltd.

Navaagan Pvt. Ltd. 10% 90% Vabbinfaru Island Paradise Pvt.

Dhigufaru Investments Pvt. Ltd. 10% 90% Static Company Pvt. Ltd.

Bodumohoraa Investment Pvt. Ltd. 10% 90% Marine Technology Maldives Pvt. Ltd.

Lagoon Resorts Pvt. Ltd. 10% 90% Jhotels & Resorts Pvt. Ltd.

a Identified for liquidation. b Winding-up process. c Have not commenced operations.

Note: GoM = Government of Maldives

Source: Information provided by the Maldivian authorities.


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Table A4.1 Maldives' air transport agreements1, as of end-October 2015

Partner Date Entry into force 5

th2

7th

3

Cab

otag

e4

Co

op5

Des

ign

atio

n6

Wit

hh

old

ing

7

Pri

cin

g8

Cap

acit

y9

Sta

t10

ALI

11

Austria 04.02.1997 Y N N Y M SOEC DA PD Y 13

Bahrain 18.01.1995 Y N N N M SOEC DA PD Y 10

Bangladesh 03.02.1985 Y N N N S SOEC DA PD Y 6

Belgium 10.08.2010 Y N N Y M SOEC DA PD Y 13

Bhutan 08.05.2011 Y N N N M PPoB DA PD Y 18

Brunei Darussalam

03.05.1986 Y N N N S SOEC DA B1 Y 10

Bulgaria 13.08.1996 Y N N Y M SOEC DA PD Y 13

China 02.03.1994 N N N N S SOEC DA PD Y 0

Czech Republic

25.11.2004 Y N N Y M SOEC DA PD Y 13

Egypt 06.01.2003 N N N Y M SOEC DA PD Y 7

France 05.02.2001 Y N N N M SOEC CoO PD Y 13

Germany 10.11.1993 N N N N M SOEC CoO PD Y 7

Hong Kong, China

11.06.2009 N N N N S SOEC DA PD Y 0

India 24.12.2008 Y N N N S SOEC DA PD Y 6

Iran 24.07.2001 Y N N Y M SOEC DA PD Y 13

Italy 13.07.2000 Y N N N M SOEC DA n/a y 10

Korea, Rep. of

27.06.1990 Y N N N S SOEC DA O/PD Y 8

Kuwait 18.06.2001 Y N N N M SOEC DA PD Y 10

Malaysia 16.09.1994 Y N N Y M SOEC DA B1 Y 17

Macao, China 16.01.2006 23.04.2006 N N N N M PPoB DA PD Y 12

Mauritius 25.02.2013 Y N N Y M SOEC DA PD Y 13

Myanmar 12.07.2001 N N N N M PPoB CoO PD Y 15

Nepal 27.09.1984 Y N N N M SOEC DA PD N 11

Netherlands 23.06.1994 N N N N S SOEC DA PD N 1

Oman 14.05.2009 N N N Y M SOEC FD PD Y 15

Pakistan 04.11.1981 Y N N N S SOEC DA PD Y 6

Poland 09.08.2007 Y N N Y M SOEC DA PD Y 13

Qatar 20.06.1999 Y N N N M SOEC DA PD Y 10

Russian Federation

27.06.1995 Y N N N M SOEC DA n/a y 0

Seychelles 22.08.2001 Y N N Y M SOEC DA PD Y 13

Singapore 12.08.1983 N N N N M SOEC DA FD N 13

South Africa 24.05.2012 Y N N Y M SOEC DA PD Y 13

Sri Lanka 18.02.1982 Y N N Y M SOEC DA PD Y 13

Switzerland 25.10.1993 Y N N N S SOEC DD O/FD Y 18


- 96 -

Partner Date Entry into force 5

th2

7th

3

Cab

otag

e4

Co

op5

Des

ign

atio

n6

Wit

hh

old

ing

7

Pri

cin

g8

Cap

acit

y9

Sta

t10

ALI

11

Thailand 21.12.1989 Y N N N S SOEC DA PD Y 6

Turkey 22.09.2011 Y N N Y M SOEC DA B1 Y 17

Turkmenistan 12.07.1999 Y N N N M SOEC DA PD Y 10

Ukraine 28.06.1994 Y N N N M SOEC FD PD Y 18

United Arab Emirates

23.01.2002 Y N N Y M SOEC DA FD N 22

United Kingdom

20.01.1996 N N N N M SOEC DD B1 Y 14

United States 05.05.2005 Y N N Y M SOEC DD FD N 28

Uzbekistan 06.11.1996 N N N N M SOEC DD PD Y 10

Yemen 20.08.2002 Y N N Y M SOEC DA PD Y 13

1 The term "air transport agreements" refers to air services agreements (ASAs), memoranda of understanding, exchange of notes, and other relevant instruments.

2 If fifth freedom rights are subject to approval by the aeronautical authorities, they are coded as not (N) granted.

3 If seventh freedom rights are subject to approval by the aeronautical authorities, they are coded as not (N) granted.

4 If cabotage rights are subject to approval by the aeronautical authorities, they are coded as not (N) granted.

5 Cooperative arrangements (Coop) clauses allowing cooperation between airlines e.g. code-sharing. 6 Designation can be single (S) or multiple (M). 7 The type of withholding clause can be: substantial ownership and effective control (SOEC), principal

place of business (PPoB), community of interest (COI), or not available (n/a). 8 The type of pricing clause can be: double approval (DA), double disapproval (DD), country of origin

(CoO), zone pricing (ZP), free pricing (FP), or not available (n/a). 9 The type of capacity clause ban be: pre determination (PD), Bermuda I (B1), free determination

(FD), other (O), or not available (n/a). 10 An exchange of statistics is foreseen (Y) or not (N) by the agreement. 11 ALI stands for Air Liberalization Index, a synthetic measure of the openness of a given ASA.

Source: Maldives Civil Aviation Authority, and online WTO information. Viewed at: https://www.wto.org/asap/resource/data/html/methodology_e.htm.

__________